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.
In this article, we'll provide a complete guide on how to dissolve an LLC in Michigan. We'll also explain the reasons why business owners choose to dissolve their LLCs, with a particular focus on voluntary and involuntary dissolution.
Steps to Dissolving a Michigan LLC
A Michigan limited liability company must undergo the dissolution process before ending its affairs.
The process comprises several important steps, all of which are necessary in order to protect the interests of the LLC members and creditors. Here are the steps you must take in order to dissolve a Michigan LLC.
Step 1: Hold the Dissolution Meeting of LLC Members
LLC owners should first meet to discuss the dissolution. Only members of the LLC can give a dissolution vote. The unanimous vote of all members is sometimes necessary for dissolution, but your operating should have this provision that might state otherwise. If a member disagrees with dissolution, they can file a lawsuit to block it.
If your LLC has more than one owner, you must decide how to deal with ownership interests in the event of dissolution. This decision will impact the final steps of the LLC dissolution process.
Step 2: Follow Your Operating Agreement
A Michigan LLC operating agreement is the governing document that sets forth the rules and regulations for LLC members.
This document should outline the dissolution process, including any requirements or restrictions on dissolution.
If your operating agreement does not mention dissolution, Michigan law requires that all LLC members agree to dissolve the company unanimously. The LLC cannot be dissolved if even one member objects to dissolution.
A Michigan LLC operating agreement will also specify what will happen with the LLC assets after dissolution.
In most cases, the LLC assets will be distributed among the members according to their ownership interests.
If there are any business debts or liabilities after dissolution, the members may be held liable for them. This is why it's vital to ensure that all debts and obligations are paid off before dissolving an LLC.
Step 3: Settle LLC Debts
Michigan LLCs must take all the assets to pay off all their debts and obligations before they can be dissolved. This includes paying off any business loans, mortgages, or other debts.
If the LLC cannot afford to pay its debts, the members may be held liable for them. In some cases, the creditors may take legal action against the members to recover what they're owed.
It's important to remember that LLC members are not personally liable for the company's debts. However, they may be held liable if they agreed to be personally responsible for the obligations of the LLC.
If there are any remaining assets after settling all debts and obligations, these assets will be distributed among the members according to their ownership interests.
Step 4: Close Business Accounts
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 Michigan Department of Licensing and Regulatory Affairs.
The limited liability company must also notify the Michigan Department of Treasury that it is dissolving. The Department of Treasury will then cancel the LLC's tax registration.
The final step in dissolving a Michigan LLC is to 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.
Step 5: Obtain a Tax Clearance Certificate
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. The process of getting a tax clearance certificate is relatively simple.
There is an online application form that you can fill out and submit electronically to file a tax clearance request.
The tax clearance request form can be found on the Michigan Department of Treasury website. You will also need to upload copies of your articles of organization, federal employer identification number (EIN), and most recent income tax return.
Before issuing the tax clearance certificate, outstanding taxes and various tax accounts must be paid in full. If your LLC owes any taxes, you will need to pay those off first.
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 6: File Articles of Dissolution
Every limited liability company in the state has to file Michigan LLC Articles of Dissolution before they can dissolve a Michigan LLC.
The Certificate of Dissolution is a document that officially ends your Michigan LLC. This form is filed with the Michigan Department of Licensing and Regulatory Affairs, Corporations Division.
The dissolution form can be downloaded from the Department of Licensing and Regulatory Affairs website.
Dissolution forms must be completed and signed by an authorized individual. The form must also include the business name, the formal date of incorporation, mailing address, and the signatures of all company members.
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.
After the Articles of Dissolution are filed, the Department of Licensing and Regulatory Affairs will send you a Certificate of Dissolution, which confirms that your LLC has been dissolved.
Reasons to Dissolve an LLC in Michigan
When LLCs no longer conduct business in the state of Michigan, they do so due to various reasons. Some LLCs voluntarily dissolve, while others get administratively dissolved by the state because they lose their good standing with it.
Voluntary Dissolution of an LLC in Michigan
Sometimes, the members of a business entity can initiate LLC's dissolution. This happens for a variety of reasons, but the most common causes include the disagreements between members, the retirement of one or more members, the LLC's business goals being met, and members wanting to go their own way.
When an LLC decides to dissolve voluntarily, it must formally dissolve the official paperwork with the Michigan Department of Licensing and Regulatory Affairs. This process is straightforward and can be done entirely online.
Involuntary Dissolution of an LLC in Michigan
When LLCs in Michigan lose their good standing with the state, the Michigan Secretary of State can dissolve the LLC. Losing the good standing means that the LLC hasn't kept up with its annual filings and hasn't been paying common taxes.
An LLC can also be involuntarily dissolved by a court order too. This usually happens when the LLC is being sued, and the court decides that dissolving the LLC is in the best interest of all parties involved.
How Do I Dissolve a Foreign LLC in Michigan?
Unlike a domestic Michigan LLC that file the dissolution form, foreign LLCs must file the certificate of Withdrawal with the Michigan Department of Treasury. Foreign entities have to submit the tax clearance certificate and pay the applicable filing fee when How much does it cost to dissolve an LLC in Michigan?filing for withdrawal.
How Much Does It Cost to Dissolve an LLC in Michigan?
Michigan dissolution papers cost $10. However, you can pay an additional fee for the expedited service. Expedited processing for the same day is $200, while one-hour processing costs $1000.
How Long Does It Take To Dissolve an LLC in Michigan?
Normal processing takes up to a week. However, if you choose expedited processing, you can shorten the period to one business day, two hours, or one hour.
Does Michigan Require Tax Clearance for LLC Dissolution?
Yes, LLCs have to obtain tax clearance. If the LLC was administratively dissolved because it lost its good standing, it has to restore good standing with the state before it can be formally dissolved.
Can I Reinstate a Dissolved LLC in Michigan?
Yes, you can reinstate a dissolved Michigan LLC, 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. There is also a required waiting period before your LLC can resume operations.
LLC Dissolution in the State of Michigan: Conclusion
If you are looking for help dissolving your LLC in Michigan, it is best to seek professional assistance.
By working with an experienced legal professional, you can be sure that the process will go smoothly and that all of the necessary paperwork will be filed correctly.