When a business owner in Colorado decides that it is time to close their business, the first step is to dissolve the LLC.
This process can be complex, and there are specific steps that need to be followed in order to ensure that the voluntary dissolution rules go smoothly.
In this article, we will provide a complete guide on how to voluntarily dissolve a Colorado limited liability company. We will explain the reasons for dissolution and provide detailed instructions for each step of the process.
Steps to Dissolving a Colorado Limited Liability Company
A Colorado LLC must perform certain steps to dissolve properly. The following is a guide on how to dissolve an LLC in Colorado.
Step 1: Notify All LLC Members of the Dissolution
LLC members must be notified of the dissolution in order for it to be effective. This can be done by mailing a proper written notice to each member, posting the advance notice in an appropriate location, or holding a dissolution meeting.
The dissolution vote must be unanimous, so it is important to ensure that all LLC members are on board with the decision.
In some instances, the Colorado LLC operating agreement may stipulate different voting procedures, so unanimous consent might not be necessary.
Step 2: Distribute LLC Assets According to the Operating Agreement
Colorado LLC operating agreement should dictate the order in which members are paid out.
State law will dictate the payout order if there is no Colorado LLC operating agreement. Generally, the assets of a dissolved LLC are distributed to members according to their ownership percentage.
Step 3: Notify LLC Creditors and Lenders
Colorado LLC's dissolution process must include notifying LLC creditors, unknown claimants, and lenders of the company's impending closure.
Creditors are businesses or individuals to whom the Colorado LLC owes money, while lenders are financial institutions that have previously loaned the LLC money.
You must settle all LLC obligations and business debts before distributing the remaining assets to the members, as per the operating agreement.
Step 4: Cancel All Business Licenses and Permits
This can be done through the Colorado Secretary of State. Depending on the license, you may have to notify the state or local municipality where your business entity is located.
Licenses and permits that may have to be canceled include professional licenses, trade licenses, fictitious business name registrations, and local tax permits and licenses.
Each license or permit will have specific instructions on how to cancel it. Be sure to follow all the steps to avoid any penalties or fines, especially for your business name.
Step 5: Settle LLC Tax Obligations
Various tax accounts must be settled before the Colorado Secretary of State processes your Articles of Dissolution. This includes business income taxes, sales, and use tax, and withholding tax.
If you have outstanding taxes on your tax accounts, the state will not dissolve your Colorado LLC until you pay them. Additionally, the state may impose legal consequences and incur penalties and interest charges.
According to Colorado law, you are also responsible for filing a final return for your LLC.
Step 6: File LLC Articles of Dissolution
A Colorado business can't terminate its legal existence unless it will file Articles of Dissolution (called the Dissolution Statement in Colorado).
The LLC's dissolution form must contain the business name, LLC's principal office address (mailing address), registration number, the formal date of the dissolution, and all LLC members' signatures.
There is a $25 filing fee for Articles of Dissolution. Be careful when filling out the information, such as the business name, to avoid paying the filing fee again.
How Much Does It Cost to Dissolve a Colorado LLC?
Once you fill in the appropriate form, you will be charged $25. However, you can choose expedited filing at an additional cost.
Keep in mind that the cost can vary depending on the minimum business taxes you owe, as well as the number of pages in your Articles of Dissolution. You should also keep in mind that the costs can be higher if you hire a professional to help you with the official paperwork and other necessary steps of the formal process.
How Long Does It Take To Dissolve an LLC in Colorado?
Online filing is usually processed within 24 hours, but it can take up to four weeks for the Colorado Secretary of State to process a paper filing. If you file online, make sure to choose an expedited service if you are in a rush.
Can I Dissolve a Foreign LLC in Colorado?
Yes. You must submit the Statement of Foreign Entity Withdrawal and include the legal information, effective date of withdrawal, and the original Certificate of Good Standing from the state in which your LLC was formed.
You may submit these documents by mail or in person before you voluntarily dissolve. This confirms that your foreign entity will no longer transact business in the state.
Do Colorado LLCs Need Tax Clearance Before the LLC's Dissolution?
The state approves LLCs to dissolve even if they don't obtain tax clearance. However, you should settle common taxes and close all tax accounts before you officially dissolve your LLC.
Can You Reinstate a Dissolved LLC in Colorado?
Yes, you can reinstate a dissolved LLC within one year of the voluntary dissolution date. To do so, you'll need to file a Certificate of Reinstatement with the Colorado Secretary of State's office.
Reinstating your LLC will not absolve you from any past tax liabilities. You'll still be responsible for paying any outstanding taxes, penalties, and interest.
How to Close a Business in Colorado...
If you are still unsure how to dissolve an LLC in Colorado, it is best to seek help from a professional since they know how your operating agreement works.
A professional service provider like IncFile or a business attorney with great legal experience can guide you through this difficult time and ensure that all the necessary steps are taken to properly dissolve your LLC in Colorado.
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