Business owners are often faced with the difficult decision of whether or not to dissolve a Minnesota limited liability company.
LLC dissolution can be a complicated process, but you should be able to get through it smoothly if you follow these guidelines.
Minnesota LLCs might consider dissolving for many reasons- bankruptcy, retirement, downsizing- and this article will outline the steps that need to take place for a Minnesota LLC to dissolve legally.
Reasons to Dissolve a Minnesota LLC
Minnesota LLCs can be dissolved voluntarily or involuntarily. Minnesota has no statute of limitations for voluntary dissolution so Minnesota LLC owners may dissolve their Minnesota LLC at any time and for any reason.
Minnesota law mandates involuntary dissolution only in the event that a Minnesota LLC is dissolved because it cannot pay its debts as they become due.
If a Minnesota LLC does not want to dissolve its Minnesota business, then it must take steps to prevent this from happening by paying off debts and finding new sources of financing.
Voluntary Dissolution of a Minnesota LLC
LLC members can decide to dissolve their business voluntarily. In the majority of cases, the owners dissolve an LLC because they can't agree on how to run the business or because they're ready to move on to other ventures.
The most common reasons for the LLC dissolution include the following:
- The members don't agree on the business's future direction. Dissolving and distributing assets may be a less expensive option than continuing to operate but losing profits or bringing in new investors for additional funding.
- The owners want to move on with their lives, so they sell all their membership interests back to the LLC at fair market value.
- The LLC isn't profitable, and the members can't agree on how to change that. In this case, dissolving the company may be the best solution.
There are other reasons why an LLC might dissolve, but these are some of the most common ones. If you're thinking about dissolving your Minnesota LLC, it's essential to understand that you'll have to go through the dissolution process before it's official.
The LLC operating agreement will probably contain a provision that specifies the procedure to voluntarily dissolve the LLC. This is usually a pretty straightforward process.
The LLC members must vote to dissolve the company, and then they must file a certificate of dissolution with the Minnesota Secretary of State.
Involuntary Dissolution of a Minnesota LLC
An LLC in Minnesota has to maintain its good standing with the state. If the company fails to comply with any of its statutory requirements, it may be administratively dissolved.
Failure to file an annual report or pay online filing fees in a timely manner are common reasons why Minnesota LLCs get involuntarily dissolved. A business owner should always maintain good standing in his state by staying up-to-date on all necessary filings and fees.
If an LLC is administratively dissolved, it will be terminated, and its assets will be liquidated to pay its debts.
It's essential to take action quickly if your company faces administrative dissolution in order to prevent any further damage.
A court order is required for a Minnesota LLC to be involuntarily dissolved. A creditor of the company must file a lawsuit and prove that the LLC failed to comply with its obligations under state law.
The court will then dissolve an administratively dissolved LLC once it makes such a ruling, but only if no order was previously issued suspending the business's authority to carry on any activities.
The Minnesota Secretary of State's website has more information on administrative dissolution for LLCs. You can also contact an attorney to learn more about the process and how you can save your business.
How to dissolve a Minnesota LLC?
There are several steps involved in the company dissolution, and if one of them isn't done correctly, your business won't be able to close down.
When dissolving an LLC, make sure you understand what needs to be done beforehand by consulting with a qualified Minnesota business lawyer.
The law in most other states provides an easy, explicit notice that you have the right to follow an LLC operating agreement or Minnesota LLC articles of organization provisions on dissolution. Minnesota's LLC Act, however, does not have such a provision.
Instead, the LLC Act of Minnesota is guided by accepted contributions and fairness doctrines. This means that the Act tries to protect members and managers from unfairness, as well as the creditors of an LLC.
Because of this, Minnesota courts have held that a dissolution notice must be explicit, clear, and unambiguous in order to be effective.
Step 1: Hold a meeting
The first step in the formal process of dissolving an LLC is to gather all the members of the company and have a meeting.
The purpose of this meeting is to vote on whether or not to dissolve the company. If more than half of the voting members agree to dissolve (or your LLC operating agreement stipulates other voting requirements), then the formal process can move forward.
The LLC operating agreement will also specify other vital aspects of the business dissolution.
If you're thinking about dissolving your LLC, it's important to talk to an attorney first. The lawyer can help you understand your options and make sure that you follow all the necessary steps to dissolve your business correctly.
Step 2: File a notice of dissolution
If your LLC no longer conducts business in the state, you have to notify the state about it by filing a notice of dissolution. The notice must be filed with the Secretary of State, and it will start the official process of terminating your LLC's existence in Minnesota.
Make sure to include the following information in your notice:
- The business name
- The effective date of the dissolution
- A statement that your LLC is dissolving voluntarily
- The signature of an authorized person (a registered agent)
You can find the notice of dissolution form on the Secretary of State's website. You can also get help from an attorney or legal services organization.
After your LLC is dissolved, you must distribute its remaining property and liabilities according to its operating agreement or Minnesota law.
If you don't have an operating agreement, the state will distribute the remaining assets and liabilities according to a set of default rules.
Be sure to notify all of your LLC's creditors and customers about the dissolution. You may also want to file a certificate of cancellation with the Minnesota Secretary of State. This will let other businesses know that your LLC is no longer in business.
A statement must also approve the dissolution that the formal membership vote was received (majority of LLC members voted in favor of dissolving). This is called the requisite vote, and it must be filed with the Minnesota Secretary of State.
Step 3: Wind up your Minnesota LLC
An LLC in Minnesota has to take care of a few final tasks before it can be officially dissolved.
If the LLC has members, they will need to transfer their transferable interest in the company to another entity or individual. All remaining property and liabilities of the LLC must be paid off or disposed of.
The transfer of transferable interests must be done in accordance with the terms of the Minnesota LLC articles and bylaws and any operating agreement that is in place.
Dissociated members can also be required to provide written notice of their intent to dissolve, transfer, or withdraw from the LLC in Minnesota prior to completing a dissolution process.
After you have notified creditors, settled any known debts and liabilities, and distributed the company's remaining property, you can file your notice of dissolution with the state.
Step 4: File Articles of Termination
Once the transfer is complete and all debts of the LLC in Minnesota have been paid off or otherwise covered by other means, an authorized person can file Articles of Dissolution (Statement of Termination) to dissolve your Minnesota company officially.
You must first file a Statement of Dissolution explaining that you are in the process of finalizing your business. It is only after you file the Statement of Dissolution and after the state has approved dissolution papers that you can submit the Articles of Termination with the MN Secretary of State.
The dissolution articles can be filed either online, in person, or by mail. You can download the forms from the SOS website or hire professional services to do this for you.
The downloadable forms are mailed or handed in person. They are shipped to Business Services Retirement Systems of Minnesota Building, 60 Empire Drive, Suite 100, St Paul, MN 55103.
The filing fee for mail or in-person submissions to the Business Services Retirement Systems is $35. There is an additional fee of $55 if you want to use their expedited service. The exact cost applies to online filing.
Can You Renew a Dissolved LLC in Minnesota?
Yes. You can reinstate a Minnesota LLC after LLC dissolution with the Business Services Retirement Systems, provided that it was involuntarily terminated for failure to file the annual renewal.
The process is relatively simple-you only have to file one annual report and pay the filing fee to the Secretary of State either in person, online or by mail.
If you want to change your business name or appoint a new registered agent after the reinstatement, you need to file an amendment to your Articles of Organization.
Can a Missed Annual Renewal Lead To LLC Dissolution in Minnesota?
Yes, if you missed your annual LLC in Minnesota renewal, it can lead to the dissolution of your business.
How Long Does It Take To Dissolve an LLC in Minnesota?
The length of time it takes to complete your paperwork varies based on the type of filing. It generally requires one week for a Minnesota LLC to dissolve.
You can also hand the notice in person and pay an expedite fee for faster service. Your business name will become available for use by other business entities.
Do I Need Tax Clearance for LLC Dissolution?
No. Minnesota does not require dissolution applicants to get tax clearance.
How Much Does It Cost to Dissolve an LLC in Minnesota?
The capital cost you have to cover is $35 when filing the notice of dissolution. If you opt for expedited filing, there is an additional $55 fee.
If there are any remaining assets in the company, they must be distributed among the LLC members according to their own interests.
This may involve a sale or other liquidation of assets. If the LLC in Minnesota is indebted, the members must also pay off any debts before dissolving the company.
Dissolving a Minnesota limited liability company is not an easy process. Between all the paperwork and checklists, it can be challenging to keep track of everything you need to do in order to dissolve your LLC correctly.
For this reason, it's vital to talk with an experienced dissolution specialist like IncFile. They can help guide the process and make sure that all of the necessary steps are taken to avoid costly mistakes along the way.