How to Dissolve an LLC in Illinois? (A Complete Guide)
When an Illinois business is completed, the function has been achieved, is no longer profitable, or the owners want to move on to other opportunities, dissolving the LLC becomes necessary.
As an expert business legal advisor with over 10 years of experience, I will provide you with a comprehensive guide on how to dissolve an LLC in Illinois.
This article will also explain the reasons why LLC owners might choose to dissolve their LLCs.
Quick Summary
- To dissolve an LLC in Illinois, consult the operating agreement, vote on the dissolution, and notify creditors.
- A dissolving LLC must close all its tax accounts to obtain a clearance certificate.
- The high rate of early business failures in Illinois, with 21.5% not making it past the first year according to Lending Tree, underscores the importance of being familiar with the dissolution process for LLCs to ensure legal and financial matters are properly addressed.
- In my opinion, the dissolution of an LLC, while complex, is a crucial step in responsibly closing a business and safeguarding future entrepreneurial endeavors.
6 Steps to Dissolving an LLC in Illinois
Before LLC members can dissolve their Illinois limited liability company, they have to go through an official LLC dissolution process that entails filing specific paperwork with the state.
Here are the steps to follow to dissolve an Illinois LLC.
Step 1: Vote To Dissolve the LLC
Voting to dissolve an LLC in Illinois involves several key steps. Firstly, the LLC members must convene a formal meeting to discuss and vote on the dissolution decision.
The specific voting requirements are typically outlined in the LLC's operating agreement, which could require a majority or supermajority vote.
During this process, it is essential to document the proceedings and the final decision in a written resolution, which serves as an official record of the vote.
In our experience, when we voted to dissolve our LLC in Illinois, we followed our operating agreement's guidelines, ensuring that all members were present, and we maintained clear, transparent communication throughout the meeting.
This helped us reach a unanimous decision to dissolve the LLC.
Step 2: Notify Creditors About Your LLC's Dissolution
An Illinois business entity should notify all known creditors and suppliers of the pending dissolution.
The notification should include a statement that the company is in the process of dissolving and instructions on how to file a claim.
This step helps ensure that all creditors have an opportunity to make a claim against the company's assets and close the credit lines.
It's important to remember that notifying creditors doesn't absolve the company of any liabilities.
All creditors must still be paid according to the company's dissolution plan or by state law.
Step 3: File Final Tax Returns and Obtain Tax Clearance
The significance of settling all tax liabilities becomes even more apparent when considering the broader business context in Illinois. The US Small Business Administration noted that between March 2021 and March 2022, 31,592 establishments in Illinois closed [1].
This statistic serves as a stark reminder of the importance of thorough financial closure, ensuring that your LLC does not contribute to this growing number due to unresolved tax issues.
You will need to close various tax accounts, including sales tax, common taxes, and any other relevant payments. Be sure to double-check that all outstanding taxes have been paid in full before closing these accounts.
"Tax clearance entails covering all tax liabilities with the Illinois Secretary of State and different departments of revenue. The sooner you take care of this, the less likely you are to experience any penalties or fines."
-Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
In our case, we closed our tax accounts by filling out a final income tax return to the appropriate body and checking the final return box when filing online.
However, several other official documents need to be submitted depending on the business accounts you have.
For example, if you had an Employer Identification Number (EIN) for your LLC, you will need to cancel it through an IRS form officially.
Step 4: File Articles or Certificate of Dissolution
The state of Illinois requires all business entities to file paperwork with the Illinois Secretary of State before the LLC gets formally dissolved. The main document is the Illinois LLC Articles of Dissolution.
The Statement of Termination (Articles of Dissolution) is a document needed to formally dissolve your LLC [2].
This document contains the following information:
- The business name and address
- The formal date of dissolution
- A statement that the LLC has fully paid all its liabilities and business debts
- The signatures of all members or managers who are authorizing the dissolution.
A completed form is sent to the Illinois Secretary of State Department of Business Services, accompanied by a filing fee of \$5.
After submitting our dissolution papers, we paid an additional \$50 to expedite the processing and received our approved documents in 24 hours.
Step 5: Distribute Assets
During the dissolution process in Illinois, one crucial step is the distribution of assets among the LLC's members.
This involves valuing and liquidating assets, settling any outstanding debts, and then distributing the remaining assets accordingly.
This process hinges on the ownership percentages specified in the operating agreement.
By adhering to these procedures and maintaining open communication among members, we successfully concluded this phase of the dissolution with all parties satisfied with the asset distribution.
Step 6: Close All Accounts and Cancel Licenses and Permits
Closing all business accounts and canceling licenses and permits is the final and critical step in the dissolution process for an LLC in Illinois.
This step involves the systematic closure of bank accounts, credit lines, and any other financial accounts associated with the LLC. Additionally, it entails the formal cancellation of any licenses or permits held for business operations.
To manage this effectively during our dissolution, we created a comprehensive checklist that detailed each account, license, and permit, ensuring nothing was overlooked.
By meticulously following this checklist, we successfully concluded the closure of all accounts and permits, officially concluding our LLC's operations in Illinois.
FAQs
How Long Does It Take To Dissolve an LLC in Illinois?
It takes over a week to dissolve an LLC in Illinois, as long as the Articles of dissolution have been filed and all remaining taxes are paid. If you opt for expedited processing, the wait is just a few days.
How Much Does It Cost to Dissolve an LLC in Illinois?
It costs \$5 to dissolve an LLC in Illinois by filing for Articles of Dissolution. The amount is payable to the Illinois Secretary of State.
Can a dissolved LLC be reinstated in Illinois?
Yes, a dissolved LLC can be reinstated in Illinois. If your LLC was administratively dissolved, you need to file Form LLC-35.40/45.65 (Application for Reinstatement Following Administrative Dissolution) with the SOS. You will have to file any missing annual reports and pay any late fees or penalties.
Do You File Taxes for a Dissolved LLC in Illinois?
You do not need to file taxes for a dissolved LLC in Illinois.
References:
- https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-IL.pdf
- https://www.ilsos.gov/publications/pdf_publications/llc3515.pdf
