When a business is no longer profitable or when the owners want to move on to other ventures, dissolving your Utah limited liability company is often the best option. In this article, we will provide a detailed guide on how to dissolve an LLC in Utah.
We will explain each step of the process and highlight some of the reasons why LLC owners choose to dissolve their LLCs.
Whether you are voluntarily dissolving your LLC or it is being forced upon you, we hope this article provides all the information you need.
Steps to Dissolving a Utah LLC
LLC dissolution process entails several important steps, all of which require careful planning and execution.
As a rule of thumb, LLC members should be on the same page when it comes to dissolving the company. Once they decide to dissolve a Utah LLC, they need to take the following steps.
Step 1: Follow the Utah LLC Operating Agreement
A Utah LLC operating agreement is one of the most important dissolution documents for any business entity operating in the state.
The Utah LLC operating agreement outlines the rules and procedures of a company, including dissolution terms and conditions.
All members need to abide by the operating agreement to avoid costly litigation if one or more members decide not to follow the contract.
For instance, certain LLC operating agreement options require unanimous support from all its member before dissolving a business entity, while others only need a majority vote.
A Utah limited liability company operating agreement is a critical document when dissolving an LLC in any case scenario. If business entities don't have a Utah LLC operating agreement, they should follow the Utah LLC Act.
Step 2: Notify Interested Parties
A business owner is obligated to notify creditors, lenders, and other third parties that their limited liability company will cease all business activities. This notification should be done in writing and must include the effective date of the dissolution.
Additionally, published notice in a newspaper of general circulation within the state is also recommended. The filing fee for publishing this notice is typically nominal but can vary depending on the publication.
Creditors can claim business debts up to three months from the date of publishing.
Most creditors won't submit claims for business debts as long as they've been notified of the dissolution in writing; however, publishing a public notice is recommended for necessary legal protection.
All the assets of the LLC will be liquidated and distributed to creditors after this three-month period. The remaining assets at this time will be given to the members of the business.
Step 3: Close LLC Business Accounts
A Utah LLC is dissolved when it ceases to do business in the state. To dissolve an LLC, you must close its bank accounts and any other business accounts.
When closing your LLC's bank account, make sure to contact the bank and let them know that the account is associated with a closed LLC. This will help avoid any problems with the bank later on.
If you own a business license of any sort, contact the local government where your LLC is located to ensure that they are aware of the LLC's dissolution.
If you have business licenses and permits in another state, contact the appropriate agency in that state and let them know about your decision to dissolve your Utah LLC.
Step 4: Obtain Tax Clearance for the Utah LLC
Tax accounts belonging to a Utah LLC have to be closed before the company can be dissolved.
You will need to obtain clearance from the Utah Department of Revenue to do this. The Utah Department of Taxation has created a clearance checklist for various tax accounts that you can use to close your company's accounts with the state agencies listed below:
- Utah State Tax Commission
- Employment Security Division, UT Labor Commission
- Industrial Accidents Division, UT Workers Compensation Fund (if applicable)
- Motor Carrier Service Bureau.
The dissolution process of settling obligations is relatively simple. You will need to fill out Limited Liability Company Form 966 and send it to the Utah State Tax Commission and Internal Revenue Service.
Tax obligations for the LLC will need to be paid in full before tax clearance can be granted.
Once you have obtained clearance, you are ready to dissolve your Utah LLC. The final step is to file Articles of Dissolution with the Utah Division of Corporations and Commercial Code.
Utah Division of Corporations and Commercial Code doesn't insist on LLCs obtaining clearance. Still, any outstanding taxes that linger after the Utah LLC dissolution process ends will be passed on to the LLC's members.
To avoid this, make sure you obtain clearance before filing Articles of Dissolution with the Division of Corporations and Commercial Code.
The final tax return for the LLC must also be filed with the IRS. There is no Utah limited liability company form specifically used for this. You will check the box on the "final return" when paying the tax through your IRS account.
Step 5: File Utah LLC Articles of Dissolution
The Articles of Dissolution for Utah LLCs must be filed with the Utah Division of Corporations & Commercial Code.
Utah Articles of Dissolution is a short document that contains all of the information necessary to dissolve your Utah LLC, including:
- Business name and address of your Utah LLC;
- The date that dissolution was approved by members or managers;
- The reason for dissolution (e.g., bankruptcy, death of a member, etc.); and
- Any other relevant information.
Utah Articles of Dissolution can be filed online or by mail. For more information on how to file Utah Articles of Dissolution, visit the Utah Division of Corporations & Commercial Code website.
A Fax Cover Letter and Utah Articles of Dissolution may be faxed to the Division of Corporations & Commercial Code at (801) 530-625.
To file Articles of Dissolution by mail, you will need to submit the following documents: Utah Articles of Dissolution Limited Liability Company form, a Fax Cover Letter, and an Affidavit for Continuing Authority form.
There is no filing fee for filing the Utah LLC dissolution articles during normal processing. However, if you want expedited processing, the state fees are $75.
Reasons to Dissolve an LLC in Utah
A business in Utah can either dissolve voluntarily, or the Utah Secretary of State can request its dissolution. In both cases, LLC assets need to be distributed, or business owners can choose to sell them before dissolving the LLC.
Voluntary dissolution of a Utah LLC
The following reasons may prompt you to dissolve a Utah LLC:
- The entity's purpose has been completed;
- There is a change in ownership of the business;
- The owner (s) want to close their business due to financial issues or personal reasons;
- The LLC is no longer profitable.
Once n LLC has been dissolved, the Utah Secretary of State will not refund any filing fee paid by its owners/members. If you decide to dissolve your business for any reason, make sure that you want to close it permanently and do not intend to reopen it at a later date.
A Utah LLC operating agreement will provide detailed instructions on how to dissolve the business. If you decide to dissolve the entity, notify all creditors and settle outstanding debts before proceeding with dissolution authorization.
In case of a dispute between LLC members, they will have to resolve it through mediation, dissolution vote, or filing a complaint in court.
Involuntary Dissolution of a Utah LLC
When LLCs fail to submit their annual report, don't maintain a registered agent, or otherwise violate state laws, the Utah Department of Commerce may dissolve the company.
Other parties are not permitted to use the name for other business purposes when this happens.
The LLC cannot continue to do business under that name and must instead select a new one or revert to doing business using its original legal name. All business debts and other liabilities incurred by the company remain in effect.
Creditors can continue to pursue owners for payment of debts owed by the business, and other business entities may sue the dissolved LLC or its members for other reasons.
To avoid this kind of liability, some companies opt to voluntarily dissolve their businesses instead of allowing a state agency to do it involuntarily on their behalf.
When an LLC is dissolved in Utah, the company must submit formal paperwork to ensure that the dissolution is legal and complete.
How Much Does It Cost to Dissolve an LLC in Utah?
There is no filing fee when submitting the Articles of Dissolution. Expedited service is charged $75.
However, if you want to hire a professional service provider to help you with the dissolution filing, the dissolution filing fee would be higher.
Can I Dissolve a Foreign LLC in Utah?
Foreign LLCs have to file the Application for Withdrawal and submit the filing fee to withdraw from Utah.
The state does not require you to close your business bank accounts before withdrawing a foreign LLC in Utah.
However, it's recommended that you leave one account open until all tax matters are settled, and any other debts have been paid off. The further process for dissolving a foreign LLC in Utah is the same as the process described above.
How Long Does It Take To Dissolve an LLC in Utah?
The processing time for the Articles of Dissolution is about one to two weeks.
However, opting for expedited processing can reduce the time to about one to two days.
How Can I Cancel a Business License in Utah?
It depends on the license your LLC used when it commenced business. For example, selling taxable goods requires you to have a Sales Tax License. If you want to cancel it, you must contact the Utah State Tax Commission.
If you used an assumed business name (DBA), you must file a cancellation of the assumed business name with the county clerk where your LLC was formed. There are other licenses that may be specific to your industry and/or locality.
To find out which licenses your LLC needs, check with your county clerk's office or state agency regulating business activity in Utah.
Can My Registered Agent Dissolve an LLC in Utah?
Your registered agent or other authorized representative can only help you dissolve your LLC if you give them the authority to do so. You can grant that authority by executing an LLC dissolution form in front of a notary public and filing it with the Division of Corporations.
The DCCA does not allow anyone other than an authorized representative or registered agent to dissolve your LLC.
Can an LLC in Utah Be Sued After It Is Dissolved?
Yes, but it depends on several factors. A dissolved LLC may still face lawsuits and claims that resulted from events while it was an active business entity.
The Utah Revised Uniform LLC Act states that all obligations, rights of action, and liabilities, including those arising out of a contract or other written agreement entered into by the limited liability company, continue against the company and its members as if it had not been dissolved.
This means that generally speaking, a creditor or other party with interest in the LLC may still sue the LLC or its former members after dissolution.
What Happens if a Company in Utah Doesn’t Dissolve?
A Utah LLC is obligated to fulfill all its business transactions even if the owners have decided to dissolve the company.
Utah LLCs that fail to file a dissolution document with the state will continue paying recurring fees and may be held personally liable for any of the company's debts or obligations.
This can become a huge financial and legal burden for the owners, so it's best to take care of dissolution properly and avoid any unwanted consequences.
Dissolving an LLC in Utah: Conclusion
Dissolving an LLC in Utah might seem complicated and intimidating. If you are not sure how to dissolve a Utah LLC or have trouble obtaining legal information, seek professional help.
A law firm can guide you through the process of dissolving your business entity so that it is legally dissolved according to all state laws.
We prefer to employ IncFile to complete the lengthy articles of dissolution filing process on behalf of our customers because it is a very time-consuming process.
They will also be able to offer assistance with any other type of legal matter related to starting a new company or operating one already established.