When a business is no longer profitable, or the owners want to move on to other ventures, dissolving the North Carolina LLC may be the best option.
This article provides step-by-step instructions on how to dissolve an LLC in North Carolina, from notifying members and filing paperwork to finalizing the dissolution.
Steps to Dissolving a North Carolina LLC
A limited liability company in North Carolina has to go through several steps before the formal process of LLC dissolution is complete.
These steps primarily include notifying the LLC members of the dissolution, consulting the LLC operating agreement to tell you what exact procedure has to be followed, and eventually settling all LLC liabilities and filing the dissolution documents with the North Carolina Secretary of State.
Step 1: Notify LLC Members of the Dissolution
Notifying the LLC members about a pending dissolution is necessary to ensure that final matters are settled and that everyone agrees on dissolving the company.
If you want to dissolve your North Carolina LLC, you need to send each member a written notice at least thirty days in advance stating that a resolution to dissolve the business will be voted on at the next meeting.
The notice should also include a copy of the proposed dissolution resolution, information about when and where the LLC dissolution meeting will take place, and how members can submit their votes (either in person or through the mail).
If all LLC members are in agreement to dissolve the company through unanimous consent, then you can proceed to the next step.
Step 2: Look Through Your Operating Agreement
Ideally, every LLC in North Carolina should have an operating agreement. The LLC operating agreement will outline the exact steps of the dissolution process.
North Carolina law will determine the dissolution process if you do not have an operating agreement.
One of the most common steps in dissolving an LLC is selling all of the LLC assets and distributing the remaining assets among LLC members. If the LLC has any business debts, the members will be responsible for paying those debts.
The operating agreement will also specify the voting procedure. A majority dissolution vote among all members is usually required to dissolve an LLC.
However, the operating agreement may require a supermajority or unanimous members' vote instead.
Step 3: Notify Lenders and Creditors
A North Carolina LLC is legally responsible for any debt and contractual obligations it has. When an LLC is dissolved, the responsibility for repaying those debts doesn't automatically go away.
That's why before you can close down your North Carolina business, you must notify all lenders and creditors that your company is going to be dissolved. You must do this whether or not you want to continue doing business under a different name.
Notifying your creditors and lenders about your dissolution is crucial because it allows them to file any claims against the company before assets are distributed among members. If you fail to notify them, there might be some additional penalties.
To notify your lenders and creditors of your LLC's dissolution, you will need to prepare notice. Make sure to include your business name, the effective day of the LLC dissolution, and the effective date on which you will be distributing any remaining assets to members.
You can also include your business address, phone number, and email address in case they need to contact you with additional questions or concerns.
Once the notice is complete, send it by certified mail with the return receipt requested. In some cases, you might also be required to publish the notice in a local newspaper or other publication.
Step 4: Close LLC Tax Accounts
Your North Carolina LLC certainly has various tax accounts associated with it.
The most common taxes include federal taxes, state taxes, payroll taxes, sales tax (if your LLC used to sell taxable goods), and more. All of these tax accounts need to be closed as part of the process.
If you fail to properly close all of your LLC's tax accounts, you could end up owing money years down the road. Outstanding taxes can also cause serious problems when trying to re-open an LLC.
Make sure you work with an accountant or other professional service provider to close all of your LLC's tax accounts properly.
Minimum business taxes still apply during the process of dissolution, so make sure you factor that into your plans.
Step 5: File LLC Articles of Dissolution
North Carolina LLC Articles of Dissolution finally dissolve your business entity. You must file Articles of Dissolution with the North Carolina Secretary of State, Corporations Division by filing the dissolution form you can download on their website.
The Articles of Dissolution for your limited liability company have to contain the business name, mailing address, effective date, the name and address of the registered agent, and the signature of a manager or member. The filing fee is $30.
After you have filed the Articles of Dissolution, make sure to send copies to all involved parties, including your local county clerk's office, the Internal Revenue Service (IRS), and the North Carolina Department of Revenue.
Make sure to complete all the necessary steps in dissolving your LLC to avoid any legal consequences and headaches down the road. If you have any questions, be sure to contact an attorney familiar with North Carolina law.
Reasons to Dissolve a North Carolina LLC
An LLC in North Carolina dissolved for many reasons, some of which are voluntary, while others involve administrative dissolution by the North Carolina Secretary of State. In both cases, it is important to follow the procedure proposed by the North Carolina Secretary of State to avoid any legal consequences.
Voluntary Dissolution of a North Carolina LLC
When the owners voluntarily dissolve their North Carolina LLC, it means that they decided to no longer conduct business in the State. This happens for a variety of reasons, but most commonly, it is because the company has reached a point where it is no longer profitable, or the owners have decided to move on to other ventures.
Other reasons why this happens include the death of a member, a change in the company's goals or objectives, or when the LLC is merged with another business.
Filing Articles of Dissolution and completing official paperwork is necessary for the voluntary dissolution of a North Carolina LLC. Dissolution filing instructions can be found on the North Carolina Secretary of State website.
Involuntary Dissolution of a North Carolina LLC
In certain instances, when a North Carolina LLC loses its good standing with the State (fails to file annual reports, operates under a false LLC name, or engages in other prohibited activities), the State may prohibit the LLC to transact business in the State by ordering its dissolution.
When this happens, the LLC must dissolve, and its assets are liquidated.
The LLC will be notified of the impending dissolution and will have an opportunity to cure the deficiency that led to the order.
If the LLC fails to cure the deficiency, then a hearing will be held, at which time members may choose to dissolve the LLC voluntarily or have it involuntarily dissolved by the State.
Related Article: Best Registered Agent Services in North Carolina
How Do I Dissolve a Foreign LLC in North Carolina?
Foreign LLCs have to file Form L-14 (Application for Certificate of Withdrawal) with the SOS to dissolve. There is a $10 filing fee for this application form.
Does North Carolina Require Tax Clearance Before LLC Dissolution?
No. However. North Carolina requires LLCs to file the final return with the IRS, even if the company is dissolving. However, if you have some outstanding taxes or penalties, the IRS may hold back the release of your final tax return until these are paid.
How Do I Dissolve My NC LLC Online?
In North Carolina, business owners can file Articles of Dissolution online by searching for "Submit a Filing to an Existing Entity" on the North Carolina SOS website and then uploading a PDF Filing.
How Long Does It Take To Dissolve an LLC in North Carolina?
Dissolving a North Carolina LLC takes up to ten business days. The documents processed by the Secretary of State and filed with the county register of deeds will be processed in the order they are received.
The LLC process is not complete until all required documents and legal information have been properly filed.
How Much Does It Cost to Dissolve an LLC in North Carolina?
North Carolina charges $30 for the Articles of Dissolution. If you opt for expedited processing, there is an additional $200 filing fee. This allows the dissolution to be completed within one day.
Can You Use a Dissolved Company Name in North Carolina?
Yes, you can use the name of a dissolved North Carolina LLC, but only after 120 days from the formal date it was dissolved.
How to Dissolve an LLC in North Carolina: Conclusion
If you are in need of legal assistance to dissolve your LLC, it is best to seek professional help from a qualified law firm.
By working with an experienced lawyer, you can be sure that all necessary steps will be taken and that the process will go as smoothly as possible. Don't take any chances when it comes to something this important – make sure you get the right advice from a professional.