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, notify creditors, close tax accounts and file the Articles of Dissolution.
- Voluntary and involuntary dissolution are methods to dissolve an LLC.
- In the absence of an operating agreement, Illinois state laws automatically apply.
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 to dissolve your company.
If you don't have an operating agreement, dissolution will be governed by the state's default rules for LLCs.
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 to dissolve your company.
If you're not sure where to find your company's operating agreement, check with your accountant or lawyer.
In most cases, the LLC's operating agreement is kept within the company's internal records.
Although the state doesn't require LLCs to have one to be registered, situations like these show why it is essential to have an operating agreement in place.
Step 2: Schedule a Meeting of the LLC Members
The formal process of dissolving an LLC starts with scheduling 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 members decide to sell the company's assets, they will need to appoint a representative to handle 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 members is required to dissolve the company.
If all members agree, the company may begin the dissolution process. However, if any members disagree with the vote to dissolve, then all LLC members' unanimous consent is needed for the company to be terminated.
If there is no LLC 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
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 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 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 [1].
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 $100.
Reasons to Dissolve an Illinois LLC
An LLC in Illinois may opt to dissolve for several reasons.
These include:
- Completion of the business
- The function has been achieved
- Business is no longer profitable
- Failure to file an annual report with the state
- Failure to pay Illinois LLC taxes or penalties
- Failure to maintain an Illinois registered agent
- Bankruptcy
- 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.
The voluntary dissolution of an LLC is usually decided on by its members for internal reasons. An involuntary dissolution may be mandated by the state due to violations, unsettled debt, or any infraction that violates the law.
1. Voluntary Dissolution of an Illinois LLC
When the owners voluntarily dissolve an LLC, they usually agree to terminate all business operations due to a predetermined expiration or completion of its function.
A voluntary dissolution can also take place if it's been determined that the business is no longer viable or conflicts in managing the company arise.
2. 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.
Related Articles:
- Premium Illinois LLC Formation Services
- How to Set up a Series LLC in Illinois
- Business Name Lookup Illinois
- Set up an LLC in Illinois
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 Illinois Secretary of State and a $100 filing fee. Expedited processing costs an additional $50.
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?
Dissolving an LLC in Illinois may cost a few hundred dollars if you hire a professional service to file the legal documents for you.
Filing the Articles of Dissolution is $100 while the state fees cost around $5.
Can a dissolved LLC be reinstated in Illinois?
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 I Need Tax Clearance for Illinois LLC Dissolution?
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?
You do not need to file taxes for a dissolved LLC in Illinois.
What Is a Decree of Judicial LLC Dissolution in Illinois?
A decree of judicial LLC 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 Illinois 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 the State of Illinois Require an LLC to Publish a Notice of Dissolution?
The state of Illinois does not require an LLC to publish a notice of 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
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 law firm members will evaluate all aspects of the dissolution process for free so that you can decide without any uncertainty about whether our services would be beneficial to you.
References:
- https://www.ilsos.gov/publications/pdf_publications/llc3515.pdf
