When a business is no longer profitable, or the owners want to move on to other opportunities, dissolving the LLC becomes necessary. Dissolving an Illinois LLC can be a complicated process, but this article will provide a detailed guide on how to do it.
There are two ways to dissolve an LLC in Illinois: voluntarily or involuntarily. This article will explain both processes in detail and the reasons why LLC owners might choose to dissolve their LLCs.
Steps to Dissolving an Illinois LLC
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.
Ideally, your LLC should have an operating agreement. This document will spell out the specific steps that need to be taken in order to dissolve your company.
If you don't have an operating agreement, dissolution will be governed by the state's default rules for LLCs.
The steps to dissolve an LLC in Illinois are as follows.
Step 1: Consult Your Illinois LLC Operating Agreement
The dissolution process starts with a review of your Illinois LLC operating agreement.
This document will outline the specific steps that need to be taken in order to dissolve your company.
If you're not sure where to find your company's operating agreement, check with your accountant or lawyer.
They should be able to help you track it down. In most cases, the LLC operating agreement is kept within the company's internal records.
Although the state doesn't require LLCs to have one in order to be registered, situations like these show why it is essential to have an operating agreement in place.
Usually, the operating agreement will require LLC members to meet and start the official dissolution.
Step 2: Schedule a Meeting of the LLC Members
The formal process of dissolving an LLC starts with a meeting of the members. This is where they will discuss how to distribute LLC assets and liabilities among themselves.
If your LLC doesn't have an operating agreement, state law will dictate how LLC assets are distributed. In most cases, assets will be sold and used to cover LLC's liabilities. According to their ownership percentage, any leftover money will be distributed among the LLC members.
Make sure you have a detailed record of what was discussed at this meeting. Minutes are an important part of any formal dissolution process. If the LLC members decide to sell the company's assets, they will need to appoint a representative to handle the sale.
This person is responsible for negotiating prices and completing the sale.
If approved, dissolution will move forward. If not, the LLC will continue to exist, and members will need to take additional steps to dissolve it.
Step 3: Vote on Dissolution
In most cases, a dissolution vote by the majority of LLC members is required to dissolve the company.
If all members agree to dissolution, a simple majority is all that is required. However, if any members dissent from the vote to dissolve, then all LLC members' unanimous consent is needed for the company to be terminated.
Again, there should be a provision in your Illinois LLC operating agreement that outlines the voting process and requirements for dissolution.
If there is no operating agreement or does not address this issue, Illinois default law will apply. Under Illinois default law, a unanimous vote of all LLC members is required to dissolve an LLC.
Step 4: Notify All Creditors and Suppliers
A business entity in Illinois 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 in accordance with state law.
Step 5: Close your LLC tax accounts
Your company's tax status will change as soon as it is dissolved, so you need to take care of a few things before the process is finalized.
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.
Closing your tax accounts usually entails simply 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 had.
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 6: File LLC Articles of Dissolution
The state of Illinois requires all business entities to file paperwork with the 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. 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 Secretary of State Department of Business Services, accompanied by a filing fee of $100.
Reasons to Dissolve an Illinois LLC
An LLC can no longer conduct business in Illinois for a number of reasons. The most common reasons are failure to file an annual report with the state, failure to pay taxes or penalties, failure to maintain a registered agent, bankruptcy, or ceasing operations.
The state can administratively dissolve an LLC if the owners do not respond to official requests for information or take corrective action when violations are discovered.
Read more: Registered Agent Services in Illinois
Voluntary Dissolution of an Illinois LLC
When the owners voluntarily dissolve an LLC, they usually come to an agreement to terminate all business operations due to some irreconcilable differences.
These usually include things such as the inability to come to an agreement on important company decisions or disagreements about how the LLC should be managed. A voluntary dissolution can also take place if it's been determined that the business is no longer viable.
When this happens, the members will complete the dissolution documents, file official paperwork with the state (file Articles of Dissolution), and wind up the business in a reasonable time.
Involuntary Dissolution of an Illinois LLC
If a business entity in Illinois fails to file annual reports or pay taxes, the Illinois Secretary of State may begin proceedings to involuntarily dissolve the company. The same is true for companies that engage in illegal activities or make fraudulent filings with the state.
When this happens, the company's assets are liquidated, and the proceeds are used to pay off creditors. Any remaining funds are distributed among the company's shareholders according to their ownership percentage.
If you're facing the involuntary dissolution of your Illinois LLC, it's important to take action immediately. The process can be complex and time-consuming, so it's best to seek the help of an experienced attorney.
FAQs
How Do I Dissolve a Foreign LLC in Illinois?
Foreign LLCs in Illinois can be dissolved by submitting an Application for Withdrawal in two separate forms, either in person or by mail. The dissolution form is sent to the Secretary of State and a $100 filing fee.
There is an additional fee for those LLCs that wish to speed up the process. The expedited filing fees are $50, but you can only apply for these through the SOS Springfield or Chicago offices.
How Long Does It Take To Dissolve an LLC in Illinois?
Once you file Articles of Dissolution and pay fees associated with LLC dissolution, the waiting period until your LLC is officially dissolved is just a little over one week. If you opt for expedited processing, the wait is just a few days.
How Much Does It Cost to Dissolve an LLC in Illinois?
Filing the Articles of Dissolution is $100. The state fees shouldn't be more than that. However, if you have a professional service provider file the Articles for you, their fees will likely be more.
The filing fee is required to be paid by credit card, cashier's check, or money order.
How Much Does It Cost to Dissolve an LLC in Illinois?
Filing the Articles of Dissolution is $100. The state fees shouldn't be more than that. However, if you have a professional service provider file the Articles for you, their fees will likely be more.
The filing fee is required to be paid by credit card, cashier's check, or money order.
Can a dissolved LLC be reinstated in Illinois?
Yes, a dissolved LLC can be reinstated in Illinois. The process for reinstating a dissolved LLC is relatively simple and can be done through the Illinois Secretary of State's website.
If your LLC was administratively dissolved, you would 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 I Need Tax Clearance for Illinois LLC Dissolution?
No, you do not need tax clearance in Illinois. However, you need to make sure to check the final return box when filing the last tax return for federal tax purposes. This will ensure that the IRS is aware of the dissolution.
Do You File Taxes for a Dissolved LLC in Illinois?
No. Minimum business taxes still apply, but the LLC does not need to file a final tax return. The business assets and liabilities are then distributed among the members according to their ownership interests.
What Is a Decree of Judicial LLC Dissolution in Illinois?
A decree of judicial dissolution is a court order that dissolves an LLC. The decree may be issued on the motion of any member of the LLC, the attorney general, or the secretary of state.
The dissolution process begins when a party files a petition for judicial dissolution with the circuit court in which the LLC is organized.
Does Illinois Require to Publish a Notice of LLC Dissolution?
No, Illinois does not require publishing a notice of LLC dissolution. However, if you're publishing your notice in a newspaper, be sure to follow the state's publication requirements.
The dissolution notice might be a good idea to run in a local newspaper to ensure that all of your creditors are aware of the dissolution.
Dissolving an Illinois LLC: Conclusion
Dissolving an LLC in Illinois may seem daunting, but it doesn't have to be.
If you are not sure how to dissolve an LLC in Illinois or have trouble obtaining legal information online, seeking professional help could save you time and money down the line. A service like this is provided by IncFile.
Experienced lawyers will evaluate all aspects of the dissolution process for free so that you can make a decision without any uncertainty about whether our services would be beneficial to you.
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