If you are the owner of an Ohio LLC and have decided that it is time to dissolve the company, you will need to take the necessary steps.
This article will provide a step-by-step guide on how to dissolve an LLC in Ohio, as well as information on why business owners might choose to do this. In addition, we will highlight the differences between voluntary and involuntary dissolution.
Steps to Dissolving an Ohio LLC
An Ohio limited liability company has to perform several important steps before it’s formally dissolved. The required steps are equally important because they allow the entity to carry out its affairs in a legal manner and ensure that it can defend its rights and interests after the dissolution process ends.
Dissolution can be either voluntary or involuntary. Before you start dissolving your business entity, it's important to know what end result you are aiming for and how dissolution will affect its owners as well as its creditors.
Step 1: Consult Your Ohio LLC Operating Agreement
LLC owners may find the dissolution process easier if they have a formal plan to follow. That's why company owners need to consult their written operating agreement and confirm that the dissolution of their business entity was addressed therein. This document, also known as a company agreement, will specify how to start the dissolution process. That usually requires holding a dissolution meeting of LLC members.
The majority of Ohio LLCs have an operating agreement containing the dissolution provision. Usually, there will be a dissolution clause that specifies the LLC dissolution procedures. A dissolution vote by the LLC members is also required to dissolve an LLC.
If your company doesn't have an Ohio LLC operating agreement or if it doesn't address dissolution, you will need to take other steps. In this case, Ohio law governs the process of dissolving the company.
Step 2: Notify Third Parties
Creditors, lenders, and other third parties interested in the company's business conduct should be notified of the dissolution. This can be done by certified mail, return receipt requested.
You can send a written notice to notify third parties that your LLC will no longer conduct business in Ohio. This will allow creditors to make a claim against the company.
If there are business debts, they will need to be paid off to dissolve the LLC. This can be done by either selling LLC assets or using money from the LLC's bank account.
Once all business debts have been paid, the remaining assets will be distributed among the LLC members or shareholders.
Unlike other states, Ohio does not have a specific requirement for how much time must pass before creditors can no longer make claims against dissolved LLCs and corporations.
However, it is recommended to wait until at least 60 days after notice has been sent to third parties (as recommended by the Ohio Secretary of State).
When sending the notice to the creditors, make sure to include your full business name, mailing address, and the effective date of the dissolution.
Step 3: Close LLC Tax Accounts
An Ohio LLC is likely to have various tax accounts with the Ohio Department of Taxation. Some common taxes include sales tax, withholding tax, and corporation franchise tax.
In order to dissolve an Ohio LLC, all of these tax accounts must be closed. This can be done by filing the final sales tax return and other required forms with the Department of Taxation.
Any outstanding taxes or fees must also be paid in full before the LLC can be considered dissolved.
Although the Department doesn't require Ohio LLCs to obtain tax clearance before moving on with the dissolution, this step is highly recommended. This will ensure that all tax obligations have been met and no penalties or fines are waiting for the company after dissolution.
Tax clearance also means you have to file Form 1065 with the Internal Revenue Service. Make sure to check the "final return" box. Minimum business taxes must be paid in full in order to obtain tax clearance.
Step 4: Close Business Accounts
Apart from tax accounts, your business bank account and any other business accounts should be closed as soon as the LLC is dissolved.
This includes credit cards and any other lines of credit your business may have.
Closing business bank accounts will help ensure that no one can access your company's funds and LLC assets after it has been dissolved.
Your registered agent (statutory agent) should be able to help you close business accounts.
Step 5: File Ohio LLC Articles of Dissolution
The official paperwork you must submit to close your LLC is the Articles of Dissolution (the Certificate of Dissolution).
The Ohio Secretary of State will process articles submitted by mail or in person, but you can avoid potential delays by submitting them online. To file online, visit the SOS website. Fill in all required fields on the form and pay the applicable filing fee with a credit card or electronic check.
The dissolution form must contain the LLC name, registered agent, the formal date of dissolution, and the signature of an authorized LLC representative.
After your articles are processed, the SOS will send you a Certificate of Dissolution (or "Certificate of Termination" if your company is still in good standing). This document confirms that your LLC has been officially dissolved.
Reasons to Dissolve an Ohio LLC
There are many reasons why an Ohio LLC can no longer transact business. Some LLCs dissolve on a voluntary basis, while others are forced to do so by the state. This section will discuss some of the reasons behind dissolutions and LLC terminations in Ohio.
Voluntary Dissolution of an Ohio LLC
Voluntary dissolution is initiated by the LLC members themselves and can be for any reason, including a desire to wind down the company's affairs, changes in business conditions, or when all of the members agree to dissolve the company.
To voluntarily dissolve an Ohio LLC, members have to consult their operating agreement and file a Certificate of Dissolution with the Ohio Secretary of State.
It is essential that all members are on the same page and agree to terminate the company's existence because disputes about the dissolution of an LLC can be particularly expensive and contentious.
An Ohio operating agreement must have a clear process for dissolving the business, including how to settle any disputes that arise between members.
Involuntary Dissolution of an Ohio LLC
Involuntary dissolution happens when an outside party forces the LLC to terminate via a court order.
This can happen when the company is unable to pay its debts, a lawsuit is filed against the LLC, or anything happens that causes the company to lose its good standing with the state.
When judicially dissolved, the LLC in Ohio has to stop operating immediately. The company can no longer transact business, except for the sole purpose of winding up its affairs in a proper way.
Once judicially dissolved, the LLC has to notify any person or corporation with which it was transacting business about its status at the time of dissolution.
It also has to inform them that they need to look for another supplier or service provider.
The LLC also has to notify each creditor, member, and claimant with whom it was transacting business at the time of dissolution that a court order is winding up its affairs. The company can no longer use its company name in any advertising or promotional materials.
How Much Does It Cost to Dissolve an LLC in Ohio?
When you file Articles of Dissolution, there is a filing fee of $20. However, the cost of dissolving an LLC in Ohio can be significantly higher, depending on the circumstances.
For example, if you have to send written notice of your LLC's dissolution to creditors, debtors or claimants, it can get expensive quickly.
Additionally, some companies may be taxed on their income when they dissolve in Ohio.
In this case (depending on the type and amount of taxable income), filing a final return and paying any taxes due could set you back a few hundred dollars.
How Long Does It Take To Dissolve an LLC in Ohio?
The processing time for Ohio LLC dissolution takes up to a week, but you can always opt for expedited processing. The expedited service offers several levels of processing, with the highest fee paid for the same-day processing.
The timeframe for Ohio LLC dissolution varies greatly depending on the state of activity.
The processing times can range from a few days to a few weeks, and most are processed within one week. Dissolution is generally quicker in more urban areas where there is a faster turnaround time at the Secretary of State's office.
How Do I Dissolve a Foreign LLC in Ohio?
Foreign LLCs in Ohio have to file the Cancellation of Foreign LLC form with the Secretary of State.
The filing fee is $50. You can use expedited or non-expedited mail, but keep in mind that the expedited mail service includes an additional $100 fee.
The legal information you have to provide on the Certificate includes the LLC name, registered agent information, principal office location, and the date of dissolution. The filing is effective when it's filed with the SOS.
Can Someone Sue a Dissolved Ohio LLC?
It will depend on whether you have followed all the steps needed to dissolve your Ohio LLC. In some instances, creditors may still be able to sue the LLC after it has been dissolved.
If you have completed all the steps required to dissolve your Ohio LLC, then you should be in the clear.
If you are still worried about potential lawsuits, it is a good idea to speak with an attorney who can help advise you on your specific situation.
How Do I Close My Ohio Withholding Account?
Ohio Department of Taxation requires all Ohio businesses to close their withholding accounts within 30 days of an employee's last day.
To do so, you will need to file the appropriate form with the Department (depending on the tax election you made when you started doing business). You will be able to file the forms online in Ohio Business Gateway.
How Do I Close My Ohio Sales Tax Account?
The so-called vendor's license (Sales and Use Tax) is a tax license that must be registered with the state of Ohio.
To close this account, you must complete a form (the final return). A copy of this form can be submitted to the office of Ohio's sales and use tax via U.S. mail, fax, or in person at one of its locations throughout the state.
How to Dissolve an LLC in Ohio...
If you are unsure how to dissolve an LLC in Ohio, it is best to seek professional help.
A law firm specializing in business entity dissolution can provide you with the information and resources you need to make this process as smooth and stress-free as possible.
Taking the time to properly dissolve your LLC will ensure that all parties involved are protected and that your business is closed appropriately.