How to Dissolve an LLC in Tennessee? (2024 Guide)
Tennessee LLCs are an excellent way for business owners to protect their remaining assets from personal liability.
However, when the time comes to dissolve an LLC in Tennessee, there are some steps that you need to take to terminate it and close out your company legally.
Tennessee LLC dissolution is a complicated process, which is why together with our legal team we have created this ultimate guide to help you facilitate this process stress-free.
This article discusses what Tennessee LLC dissolution entails and how business owners can go about dissolving their Tennessee LLC without any legal issues or repercussions.
- To dissolve an LLC in Tennessee, LLC members must review the operating agreement and follow the guidelines stipulated for disbanding the company.
- It costs $20 to dissolve an LLC and file for the Articles of Termination with the Tennessee Department of State, Division of Business Services.
- The high rate of business closures in Tennessee, with 65.5% failing within ten years, illustrates the critical nature of fair and lawful asset distribution in the dissolution process.
- Based on personal experience, the dissolution of an LLC in Tennessee, while intricate, is a necessary undertaking for a conclusive and legal business resolution.
6 Steps to Dissolve an LLC in Tennessee
If you have a Tennessee LLC and wish to dissolve your company, follow these six steps.
1. Vote to Dissolve the LLC
Before any formal action, the members (owners) of the LLC must agree to dissolve it. This usually requires a vote following the LLC's operating agreement.
In Tennessee, the specific requirements for the vote, such as the percentage needed for approval, should be outlined in the operating agreement.
If the agreement does not specify, Tennessee state law will apply.
We documented this dissolution decision in the form of a written resolution, which was kept with the LLC's official records.
This resolution serves as proof that the decision to dissolve was made according to the LLC's rules and state law.
2. Notify Creditors About Your LLC's Dissolution
Notifying creditors is a critical step, particularly in a state where, between March 2021 and March 2022, 15,211 establishments closed as per the data provided by the US Small Business Administration, reflecting the significant challenges businesses face .
In Tennessee, this involves sending a written notice to each known creditor, informing them of the dissolution. This notice should include a claim deadline, which cannot be less than 90 days from the date of the notice.
During our dissolution process, the notice we sent also provided instructions on how to submit claims and indicated that claims not received by the deadline would not be accommodated.
This step is crucial to limit your liability and ensure all outstanding debts are addressed before the LLC is fully dissolved.
3. File Final Tax Returns and Obtain Tax Clearance
The LLC must file its final tax returns with the IRS and the Tennessee Department of Revenue. This involves checking the "final return" box on the tax forms .
In Tennessee, obtaining a tax clearance or a letter of good standing from the Department of Revenue is recommended. This document proves that the LLC has no outstanding tax obligations.
It's an important step to avoid future tax-related complications and is often required before filing the dissolution paperwork with the state.
4. File Articles or Certificate of Dissolution
In our case, this document included information such as the LLC's name, the date of dissolution, and a statement that the LLC had fulfilled all its obligations to creditors and tax authorities.
There may be a filing fee associated with this submission.
Once filed, this document legally ends the existence of the LLC in Tennessee, so it should only be filed after all other steps are completed.
5. Distribute Assets
After paying creditors and settling all obligations, the remaining assets of the LLC should be distributed to the members.
"The distribution of assets following dissolution shall adhere to the stipulations set forth in the LLC's operating agreement; in the absence of such specifications, it shall conform to Tennessee state law."
-Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
In our dissolution, distributions were made based on the ownership percentages of the members.
It's important to keep detailed records of these distributions for tax and legal purposes.
6. Close All Accounts and Cancel Licenses and Permits
Finally, close all business accounts, including bank accounts, credit lines, and any other financial accounts associated with the LLC.
Additionally, in our case, we canceled any business licenses or permits that the LLC held. This step was crucial to prevent future liabilities and to ensure that no one conducts business under our LLC's name.
It's also a good practice to notify any agencies, clients, or vendors of your LLC's closure to avoid confusion or continued business solicitations.
How Long Does It Take To Dissolve an LLC in Tennessee
It takes 3-5 business days to dissolve and LLC in Tennessee if you choose to file online or by mail. However, if you deliver the documents in person, the department can process them while you wait.
How Much Does It Cost To Dissolve an LLC in Tennessee?
It costs $20 to dissolve an LLC in Tennessee. The filing fee is for the Articles of Dissolution.
Is a Final Tax Return Required in Tennessee after Dissolution?
Yes, a final tax return is required in Tennessee after dissolution, and it includes sending the required annual report if there are any behind. Tennessee requires no specific form for the final tax return, but most likely, you will use different forms depending on the type of your entity.