How to Dissolve an LLC in Michigan? (Step by Step Guide)
If you're a business owner in Michigan, there may come a time when you need to dissolve your LLC. This process can be complicated, so it's essential to understand the steps involved.
I teamed up with experienced legal advisors to provide you with a comprehensive guide on how to dissolve an LLC in Michigan. The article will also help you understand the reasons why an LLC is terminated.
Quick Summary
- To dissolve an LLC in Michigan, hold a dissolution meeting and consult the operating agreement.
- LLC owners must settle all debts and tax obligations before dissolution.
- With nearly half of all U.S. businesses failing within the first five years, as indicated by a 48.4% rate reported by LendingTree, the importance of a well-structured dissolution plan for Michigan LLCs cannot be overstated.
- In my opinion, the detailed steps for dissolving an LLC in Michigan reflect the state's commitment to supporting business owners through every phase of their entrepreneurial journey, including the difficult decision to close down.
6 Steps to Dissolving an LLC in Michigan
A Michigan limited liability company must undergo the dissolution process before ending its affairs. Here are the steps you must take to dissolve a Michigan LLC.
Step 1: Vote to Dissolve the LLC
LLC owners should first meet to discuss the dissolution. Only members of the LLC can give a dissolution vote.
The voting process and requirements should be outlined in the LLC operating agreement. If this document is absent, the state laws requires a unanimous vote for dissolution.
In our experience, our LLC had more than one owner, so we voted and considered how to deal with ownership interests.
Step 2: Notify Creditors About Your LLC's Dissolution
With the US Small Business Administration reporting that 20,402 Michigan establishments closed between March 2021 and March 2022, it's crucial when closing an LLC in Michigan to inform all creditors of the dissolution promptly to resolve any remaining debts or claims [1].
In our case, we communicated with our creditors through a written notice.
"Once creditors have been informed, the LLC needs to allow the claim period to lapse before allocating any leftover assets to its members, making sure to settle all legitimate claims beforehand."
-Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
Step 3: File Final Tax Returns and Obtain Tax Clearance
Michigan Department of Treasury requires every Michigan LLC to obtain a tax clearance certificate that confirms that the tax liabilities of the LLC are up to date.
There is an online application form that you can fill out and submit electronically to file a tax clearance request which can be found on the Michigan Department of Treasury website.
Before issuing the tax clearance certificate, outstanding taxes, and various tax accounts must be paid in full. During our dissolution, our LLC owed some taxes, so we had to pay those off first before filing a tax clearance request.
The Department of Treasury also offers a payment plan for LLCs that owe back taxes. You can find more information about the payment plan on the Department of Treasury website.
Step 4: File Articles or Certificate of Dissolution
Every limited liability company in the state has to file Michigan LLC Articles of Dissolution before they can dissolve a Michigan LLC [2].
The Certificate of Dissolution is a document that officially ends your Michigan LLC. This form is filed with the Michigan Department of Licensing, Corporations Division.
We downloaded our dissolution form from the Department of Licensing and Regulatory Affairs website.
Articles of Dissolution can be filed online through the Department of Licensing and Regulatory Affairs Corporations website or by mail.
There is a $10 filing fee for dissolving an LLC in Michigan using the dissolution form.
After the Articles of Dissolution are filed, the Department of Licensing and Regulatory Affairs, Corporations Division will send you a Certificate of Dissolution, which confirms that your LLC has been dissolved.
Related Articles:
- Michigan LLC Business Search
- Best Registered Agents in Michigan
- How to Apply for an LLC in Michigan
- Premium Michigan LLC Formation Services
Step 5: Distribute Assets
Before distributing any assets, our LLC paid off all its liabilities. This includes debts to creditors, outstanding loans, and any other financial obligations.
It's important to prioritize these payments according to the legal order of precedence as specified in Michigan law.
If the LLC's operating agreement specifies a particular method or order for distributing assets, those instructions must be followed. The operating agreement may outline specific percentages or methods for asset distribution among members.
Step 6: Close All Accounts and Cancel Licenses and Permits
Business entities in Michigan must close bank accounts, credit accounts, and any other accounts related to the business.
This includes canceling any licenses or permits with the Department of Licensing and Regulatory Affairs.
We also notified the Department of Treasury that our LLC is dissolving and they cancelled our LLC's tax registration.
Notify all relevant state and federal agencies about the dissolution. You should also inform any customers or clients who may have been doing business with the company.
FAQs
How Do I Dissolve a Foreign LLC in Michigan?
You can dissolve a foreign LLC in Michigan by filing the certificate of Withdrawal with the Michigan Department of Treasury.
How Much Does It Cost to Dissolve an LLC in Michigan?
It costs $10 to dissolve an LLC in Michigan. You may have to pay an additional fee for the expedited service.
How Long Does It Take To Dissolve an LLC in Michigan?
It takes approximately a week to dissolve an LLC in Michigan. The process may take longer if there are pending cases against the company or one of its owners.
Can I Reinstate a Dissolved LLC in Michigan?
Yes, you can reinstate a dissolved LLC in Michigan, but there are specific steps that must be taken. You will need to file Articles of Reinstatement with the Department of Licensing and pay all applicable fees.
References:
- https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-MI.pdf
- https://www.michigan.gov/lara/-/media/Project/Websites/lara/cscl/Folder1/731_08-15.pdf
