How to Dissolve an LLC in Pennsylvania? (PA Business Guide)
LLC owners might opt to dissolve their company for reasons such as the voluntary conclusion of business operations, termination of a project, personal choices, or when the entity becomes economically unfeasible.
Whatever the case, you must take the necessary steps to properly dissolve your LLC.
As an experienced business consultant and legal advisor with over a decade of practice, I’ll provide you with a comprehensive guide to legally dissolving an LLC. The article is backed by the necessary research and legal information.
- To dissolve an LLC in Pennsylvania, the process involves a formal vote by LLC members, notification to creditors, obtaining tax clearance, and filing the Articles of Dissolution.
- A unanimous vote and written consent of all LLC members are required for the dissolution to be approved, as per the Pennsylvania Act.
- According to the U.S. Small Business Administration, in 2023, small businesses in Pennsylvania experienced 40,269 openings and 25,682 closings, highlighting the dynamic nature of business lifecycles.
- Personally, ensuring clear communication with creditors and proper filing during dissolution is crucial to avoid future legal and financial issues.
6 Steps to Dissolving an LLC in Pennsylvania
Follow the steps in the dissolution process to legally terminate your Pennsylvania limited liability company.
Step 1: Vote to Dissolve the LLC
This is typically done per the operating agreement, which often outlines the required voting process and the necessary majority for decisions.
During our process, the operating agreement didn't specify any dissolution terms so the state law provided us with a default procedure.
The Pennsylvania Act required a unanimous vote and written consent of all LLC members for our dissolution to be approved.
It's crucial to document this decision in the form of a written resolution, as it serves as an official record of the members' intent to dissolve.
Step 2: Notify Creditors About Your LLC's Dissolution
Notify creditors, banks, and interested parties of the intent to dissolve by sending them a notice.
In our case, the notice specified the date of the dissolution and a statement indicating the timeframe by which our LLC could settle outstanding claims.
"Consider publishing a notice of your LLC's dissolution in a local newspaper to inform unknown creditors, thereby safeguarding against potential liabilities. While not mandatory, this step can prevent claims of intentional debt evasion following your business's closure."
-Jon Morgan, Co-Founder & Chief Editor of Venture Smarter
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.
This step gains importance considering that, as per the Business Employment Dynamics, in 2023, small businesses accounted for 40,269 openings and 25,682 closings, illustrating the fluid nature of business operations and the significance of clear communication during dissolution .
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 the dissolution process.
Step 3: File Final Tax Returns and Obtain Tax Clearance
Pennsylvania law requires business entities to obtain a tax clearance certificate from the PA Department of Revenue before the LLC can be formally dissolved.
Pay outstanding taxes, including sales tax, employer withholding, and other miscellaneous tax accounts.
Without tax clearance certificates, the Pennsylvania LLC will not dissolve, and the state could seize its assets to cover any outstanding tax liabilities.
We obtained our tax clearance certificate by filing Form REV-181 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 4: File Articles or Certificate of Dissolution
File the Articles of Dissolution (Certificate of Dissolution) with the Pennsylvania Department of State to confirm that the LLC dissolution has been completed under state law .
The Pennsylvania Secretary of State requires every Pennsylvania LLC to submit a Tax Clearance Certificate along with the Articles of Dissolution.
The Certificate of Dissolution Form must contain the following:
- Business name
- Mailing address
- Date of dissolution
- A statement that the company complies with all state laws.
The form must be signed by an authorized individual (a Pennsylvania registered agent or LLC member).
The fee for filing the Certificate of Dissolution is $70. You can file online or by mail.
This process is crucial, especially in a changing business landscape where the percentage change of new business applications filed in December 2023 increased by 13.8% compared to December 2022, according to the U.S. Chamber of Commerce, reflecting the dynamic nature of the business environment in Pennsylvania .
During our LLC closure, once the Department of State had processed our Articles of Dissolution, they sent us a Certificate, which confirmed the dissolution of our Pennsylvania LLC.
Step 5: Distribute Assets
Once the LLC has been formally dissolved, any remaining assets should be distributed among the members.
This distribution must be done under the LLC's operating agreement or, if the agreement doesn't specify, in line with state law.
Typically, assets are distributed after all debts and liabilities have been paid, and any remaining assets are shared among members based on their ownership percentages.
During our dissolution process, this step was crucial for ensuring that all members received their fair share of the LLC's remaining value.
Step 6: Close All Accounts and Cancel Licenses and Permits
The final step in dissolving an LLC in Pennsylvania involves closing all business accounts and canceling any licenses or permits held by the LLC.
In our case, this included bank accounts, credit lines, and any other financial accounts associated with our Pennsylvania business.
Additionally, all business licenses and permits must be formally canceled to avoid ongoing obligations or liabilities.
This step is essential to prevent future legal or financial complications and marks the completion of the dissolution process.
It's important to thoroughly ensure that all accounts and licenses are fully closed and terminated.
How Long Does It Take To Dissolve an LLC in Pennsylvania?
It takes more than a month to dissolve an LLC in Pennsylvania. This includes the time the SOS takes to process the filing of a tax certificate and the Articles of Dissolution.
How Much Does It Cost to Dissolve an LLC in Pennsylvania ?
It costs around $70 to dissolve an LLC in Pennsylvania. However, additional costs apply for expedited processing: $1,000 for one-hour service or $300 for three-hour processing.
How Do I Close My Pennsylvania Withholding Account?
You can use e-TIDES to close your Pennsylvania withholding account by filing a termination notice and paying any outstanding taxes. 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 a Pennsylvania LLC Be Sued After It Is Dissolved?
A Pennsylvania LLC can be sued within two years after it is dissolved. The dissolution of the business does not nullify any claims by creditors or clients during this period, as provided in Pennsylvania state laws.