When a business is no longer viable or when the owners have had enough, dissolving an LLC in Pennsylvania may be the best option. This article will provide a detailed guide on how to dissolve an LLC in Pennsylvania, from start to finish.
We'll also take a look at some of the reasons why business owners might choose to dissolve their LLC and what happens during both voluntary and involuntary dissolution.
Steps to Dissolving a Pennsylvania LLC
LLC dissolution for a Pennsylvania limited liability company entails several steps that are equally significant. Skipping any of them could result in significant delays and extra costs for the business entity. Business owners have to take the following steps in order to dissolve an LLC in Pennsylvania.
Step 1: Notify LLC Members of the Intention to Dissolve
Pennsylvania LLC dissolution begins with notifying all members of the intention to dissolve. This notification should include a statement of intent and the planned date for the dissolution meeting. You have to send the notification by certified mail, return receipt requested.
If there are any disputes among LLC members regarding the decision to dissolve, they will need to be resolved before taking further steps.
LLC assets must not be distributed among members until complete dissolution. Initially, the assets have to be used to cover outstanding debts. If any assets are left over, they must be distributed among the LLC members in proportion to their ownership interest.
The company will continue operating until all of its liabilities have been settled and its expenses have been paid off.
Step 2: Follow Your LLC Operating Agreement
Every Pennsylvania LLC has an operating agreement that outlines the process for dissolution.
The operating agreement should clearly state when, where, and how a vote will be held to dissolve the LLC. In most cases, operating agreements require that all LLC members consent to dissolve an LLC in Pennsylvania.
If the operating agreement doesn’t have any provisions on how to dissolve the LLC, then Pennsylvania state law will govern the process.
In either case, it is essential to follow the terms of the operating agreement or state law to avoid any legal disputes down the road.
Step 3: Notify Creditors of Intent to Dissolve
The next step in dissolving an LLC is notifying its creditors of the intent to dissolve. This can be done by sending them a notice specifying the date when the dissolution will occur, along with a statement that they may object to the dissolution within a certain period.
Creditors who do not respond to the LLC's notice within the given timeframe may lose their opportunity to collect any outstanding business debts from the Pennsylvania LLC.
The debts will be written off, and the LLC will not be held liable for paying them.
If any creditors respond to the notice by objecting to dissolution, they must provide sufficient evidence that they have a legitimate claim against the LLC. If their claims are valid, the business must pay its outstanding debts before dissolution.
Step 4: Obtain Tax Clearance Certificates
Business tax accounts must be cleared before the LLC can be formally dissolved.
This means that all tax liabilities must be paid in full, and any outstanding taxes must be closed. The best way to ensure this is done is by obtaining tax clearance certificates from the Pennsylvania Department of Revenue.
Without tax clearance certificates, the Pennsylvania LLC will not dissolve, and the state could seize its assets to cover any outstanding tax liabilities.
Obtaining tax clearance certificates can be lengthy, so it is important to start this process as soon as possible.
You can obtain your tax clearance certificate by filing Form REV-181 (Application for Tax Clearance Certificate) with the Bureau of Employment Security of the Department of Labor & Industry and the Pennsylvania Department of Revenue.
A Pennsylvania LLC must also file its final federal income tax return by completing Form 1065 and checking the "final return" box.
Step 5: Wind up Company Affairs
After Pennsylvania LLCs pay taxes, they have to close remaining business accounts, including bank accounts and credit card accounts. All assets must be distributed among the members, and any remaining debts must be paid off.
If LLCs no longer conduct business, their business accounts are no longer active. It is important to close those accounts because the LLC may be charged account maintenance fees if they are left open and inactive.
It is good to keep copies of all closed bank statements for tax purposes when closing business accounts.
Step 6: File Pennsylvania LLC Articles of Dissolution
The final step in dissolving a Pennsylvania LLC is filing the Articles of Dissolution (Certificate of Dissolution) with the Pennsylvania Department of State. This document confirms that the LLC dissolution has been completed under state law.
Pennsylvania Secretary of State requires every Pennsylvania LLC to submit a Tax Clearance Certificate along with the Articles of Dissolution.
The Certificate shows that all state taxes owed by your Pennsylvania LLC have been paid.
The Certificate of Dissolution Form must contain the business name, mailing address, the date of dissolution, and a statement that the company complies with all state laws.
The form must be signed by an authorized individual (Pennsylvania registered agent or LLC member).
The fee for filing the Certificate of Dissolution is $70. You can file online or by mail.
Once the Department of State has processed your Articles of Dissolution, they will send you a Certificate of Dissolution, which confirms the dissolution of your Pennsylvania LLC.
Reasons to Dissolve a Pennsylvania LLC
When the owners decide to voluntarily dissolve a Pennsylvania LLC, the dissolution will be a voluntary dissolution. On the other hand, when a Pennsylvania LLC loses its good standing status with the Pennsylvania Department of State, PA Department has the right to dissolve the Pennsylvania LLC.
Voluntary Dissolution of a Pennsylvania LLC
A business entity in Pennsylvania may choose to dissolve voluntarily at any time. This may happen when the LLC has accomplished its purpose or is not making a profit anymore and has become financially insolvent. A Pennsylvania LLC can also decide to wind up its affairs due to disagreements between limited liability company members.
Once a Pennsylvania LLC has decided to dissolve, the members must file Articles of Dissolution with the Department of State and obtain the Tax Clearance Certificate from the Department of Revenue and the State Bureau of Employment Security of the Department of Labor and Industry.
This will officially terminate your business entity status in Pennsylvania, and you are no longer required to pay taxes or report income from your business activities after that date.
Involuntary Dissolution of a Pennsylvania LLC
The Pennsylvania Secretary of State or the Department of Revenue has the right to dissolve a Pennsylvania LLC if it fails to maintain good standing with the state.
This can happen when the LLC doesn't maintain a registered agent, fails to send the annual reports and fulfill other obligations, or has tax issues. If any court actions are taken against the LLC, it may also be dissolved.
When this happens, the LLC members must wind up the company's affairs and distribute its assets.
This usually includes selling off assets, paying creditors, and distributing what's left to the members.
If you're facing the involuntary dissolution of your Pennsylvania LLC, contact an attorney for help.
They can guide you through the process and make sure that your rights are protected. Any mistakes during this legal process can lead to costly outcomes and legal issues down the line.
Related Article: Looking Up an LLC in Pennsylvania (Guide)
Can I Dissolve a Foreign LLC in Pa?
Unlike a domestic Pennsylvania LLC, foreign LLCs file Certificate of Cancellation of Foreign Registration with the Pennsylvania Secretary of State.
The dissolution form for foreign LLCs and corporations must be submitted along with the Tax Clearance Certificates.
The filing fee is $70, the same as for a domestic LLC. Foreign entities have to follow the same procedure as domestic LLC. Primarily, that involves the process of winding up the business, fulfilling tax obligations, and submitting all the forms the state requires.
How Do I Dissolve a Single-Member LLC in Pa?
Single-member LLCs also have to follow their operating agreement even though only one member is involved in the company affairs.
The owner has to follow the procedure of winding up the business, closing all business accounts, and filing the final tax return before filing the dissolution certificate with the state.
If you are the only member of your LLC, you will need to provide a written statement that confirms that your LLC is being dissolved voluntarily and not due to any legal action.
How Long Does It Take To Dissolve an LLC in Pennsylvania?
The processing time will depend on how fast the Department of Revenue processes your tax certificate, which is usually up to one month.
The SOS takes around seven days to process the filing after that.
Bureau of Corporations and Charitable Organizations offers to expedite filing services for business organizations and documents. Expedite processing will be completed in two (24) hours of receipt of the document by the Bureau, provided it is received no later than noon on a normal State business day.
How Much Does It Cost to Dissolve an LLC in Pennsylvania?
There is a $70 filing fee to submit your Certificate of Dissolution. Additional costs are applicable if you hire a lawyer to help with the dissolution process.
Expedited processing is available for an additional $1,000 for one-hour processing or $300 for three-hour processing.
How Do I Close My Pa Withholding Account?
e-TIDES is the Pennsylvania Department of Revenue's electronic tax filing system. You can use e-TIDES to close your withholding account by filing a termination notice and paying any outstanding taxes you owe.
Your business must register with e-TIDES before filing its final return online, or you may print out the form for your specific entity (LLC) and mail it in.
Can an LLC in Pennsylvania Be Sued After It Is Dissolved?
Sometimes. If an LLC is dissolved in Pennsylvania, the company may still be liable for any debts or legal actions that were taken against it while it was active. For this reason, it is important to notify all of the company's creditors and partners before dissolving the LLC.
Additionally, if the LLC owns any property or assets at the time of dissolution, those should be sold or transferred to another legal entity.
Dissolving an LLC in Pennsylvania: Conclusion
If you want to dissolve an LLC in Pennsylvania, it is important to seek professional help. Navigating the process of dissolution can be complicated, and there are specific steps that must be taken to ensure that the process goes smoothly.
A law firm can provide you with the legal information and assistance you need to make sure everything goes according to plan.