How to Dissolve an LLC in Massachusetts? (Full Guide)
An LLC in Massachusetts may be dissolved due to a variety of reasons. There are a few steps that you will need to take to complete the voluntary dissolution process.
I consulted our certified legal advisors, summarized all the information you need to know, and curated this step-by-step guide on how to dissolve a Massachusetts limited liability company.
- To dissolve an LLC in Massachusetts, consult the operating agreement, close all tax accounts, and file the Articles of Dissolution to the Secretary of State.
- The law mandates that you inform banks, creditors, and loan associations about the dissolution.
- Considering the relatively low business failure rate in Massachusetts, at 19.0% within the first year compared to the national average of 20.7%, the process of dissolving an LLC in the state could be less common but remains an essential procedure for those affected.
- In my view, the dissolution process, while daunting, is a necessary step to ensure a clean and responsible closure for any Massachusetts LLC facing unforeseen circumstances.
6 Steps To Dissolving an LLC in Massachusetts
The steps to dissolve your Massachusetts LLC should be followed to legally terminate the business.
Step 1: Vote to Dissolve the LLC
Before initiating the dissolution process, it's crucial to reflect on the broader business climate in Massachusetts. Between March 2021 and March 2022, the state saw 23,488 establishments close, according to the US Small Business Administration .
This statistic underscores the importance of a well-considered decision-making process, as outlined in your Massachusetts LLC operating agreement, before proceeding with dissolution.
Before taking any action to dissolve your LLC, it's important to follow your Massachusetts LLC operating agreement.
"According to Massachusetts laws, an operating agreement should lay out the process for dissolution, voting requirements, division of assets, as well as any other important information about dissolving the business."
-Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
If you don't have an operating agreement, you will need to follow the Massachusetts LLC Act provisions .
State laws require filing a unanimous written consent with the Massachusetts Secretary of State's office.
Once you have filed the written consent, you will need to wait for 60 days.
During our process, a majority of the LLC Members approved the dissolution plan as per the operating agreement. And since there were no objections during the 60 days, we proceeded with dissolving our Massachusetts LLC.
Step 2: Notify Creditors About Your LLC's Dissolution
Notifying creditors is the next crucial step. You must inform them about the LLC's dissolution and settle all outstanding debts via a written notice and include a deadline for making claims.
You must ensure that all debts and claims are addressed to avoid any legal complications later on
Step 3: File Final Tax Returns and Obtain Tax Clearance
The next step in dissolving your Massachusetts limited liability company is to close all tax accounts with the IRS. This includes filing a final tax return.
After filing all our final tax returns, we also obtained a tax clearance certificate from the Massachusetts Department of Revenue. This certificate indicated that our LLC has no outstanding taxes owed to the state.
Once you have obtained this certificate, you can move on to the next step in the dissolution process.
Step 4: File Articles or Certificate of Dissolution
File a Certificate of Cancellation, also referred to as Articles of Dissolution, to the Massachusetts Secretary of the Commonwealth, Corporations Division .
You will need to include the following information:
- Business name
- Date of dissolution
- Reason for dissolution.
LLC members will also need to sign this document and have it notarized. The Secretary of the Commonwealth can usually process your paperwork in 3-5 business days. In our case, our dissolution papers were processed in four working days.
A filing fee of $100 must be paid either by check or money order made payable to the Commonwealth of Massachusetts.
If you are a federal employer, you will also need to file an LLC annual report with the corporation's division of the Massachusetts Secretary of State's office. These reports are due every year on your LLC's formation anniversary.
You will need to file a final report to avoid the administrative dissolution of your Massachusetts LLC.
Step 5: Distribute Assets
After settling the debts, distributing the remaining assets among the members is the next step. All the procedures for asset distribution must be done according to the LLC agreement.
In our experience, this had to be done based on the ownership percentages as outlined in our operating agreement. It was important to be fair and transparent during this process to maintain good relationships with my co-members.
Step 6 : Close All Accounts and Cancel Licenses and Permits
Before closing any accounts, it's important to visit the bank where the LLC's accounts were held and provide official documentation of the LLC's dissolution as proof.
Ensure all checks have cleared and all automatic payments are stopped before closing the account.
As for credit accounts, you should contact each credit card company and lender to close the accounts. They may request a written statement or a copy of the dissolution documents.
Pay off any outstanding balances or transfer them to a personal account if necessary.
We also had to cancel any business licenses or permits to avoid accruing ongoing fees or obligations. This was a straightforward process but required contacting various agencies to ensure everything was properly closed.
Do I Need to Close My EIN before dissolving an LLC in Massachusetts?
Yes, you will need to close your EIN before dissolving an LLC in Massachusetts. This can be done by filing a final tax return to obtain tax clearance from the Massachusetts Department of Revenue.
What Is the Difference Between Dissolving and Liquidating an LLC?
The Difference Between Dissolving and Liquidating an LLC is that the former means ending a business as a legal entity, while liquidation entails selling or distributing the LLC's remaining assets before dissolution.
How Long Does It Take to Dissolve an LLC in Massachusetts?
It takes 3-5 business days to dissolve an LLC in Massachusetts. This is the total time the SOS takes to process the dissolution documents.
How Much Does It Cost to Dissolve an LLC in Massachusetts?
It costs $100 to dissolve an LLC in Massachusetts. The filing fee covers the processing od the Certificate of Cancellation with the Secretary of the Commonwealth.