How to Dissolve an LLC in Utah? (A Complete Guide)
When a business is no longer profitable or when the owners want to move on to other ventures, dissolving your Utah LLC is often the best option.
As a seasoned expert in the industry, I'll share with you my insights on the dissolution process for your Utah LLC. I consulted legal advisors and business specialists in the state to provide you with all pertinent information you need.
We will explain each step of the process and highlight some of the reasons why LLC owners choose to dissolve their LLCs.
Quick Summary
- To dissolve an LLC in Utah, owners are required to follow the company's operating agreement and comply with statutory requirements.
- LLC owners must submit the Articles of Dissolution with the Utah Division of Corporations & Commercial Code.
- With 333,661 small businesses making up 99.3% of Utah's business landscape, understanding the dissolution process is essential for owners, particularly as the economic environment has led to significant closures in the recent period.
- From my perspective, dissolving an LLC in Utah is not just an end but a necessary step toward adapting to the ever-changing business landscape.
6 Steps to Dissolving an LLC in Utah
Steps to dissolving a Utah LLC entail careful planning and execution.
LLC members should be on the same page when it comes to dissolving the company, a decision not taken lightly.
Reflecting on the broader economic landscape, it's noteworthy that, according to the 2023 US Small Business Administration, between March 2021 and March 2022, 11,398 Utah establishments closed [1].
This statistic underscores the challenging environment in which businesses operate, highlighting the importance of a unified decision when a majority vote to dissolve an LLC is achieved. Following this consensus, they need to take the following steps.
Step 1: Vote to Dissolve the LLC
Regarding the voting procedure, the Utah LLC operating agreement outlines the rules of a company, including the voting terms and conditions.
For instance, certain LLC operating agreement options require unanimous support from all its members before dissolving a business entity, while others only need a majority vote.
If business entities don't have a Utah LLC operating agreement, they should follow the Utah LLC Act.
During our dissolution, all members abided by the operating agreement to avoid costly litigation.
Step 2: Notify Creditors About Your LLC's Dissolution
A business owner is obligated to notify creditors, lenders, and other interested parties that their limited liability company will cease all business activities.
In our case, this notification was done in writing and included the effective date of the dissolution.
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.
Step 3: File Final Tax Returns and Obtain Tax Clearance
Tax accounts belonging to a Utah LLC have to be closed to obtain clearance from the Utah Department of Revenue.
File a final tax return with the Internal Revenue Service (IRS).
During our LLC closure, we had to pay all our tax obligations in full before tax clearance could be granted.
You will need to fill out Limited Liability Company Form 966 and send it to the Utah State Tax Commission and Internal Revenue Service.
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.
Step 4: File Articles or Certificate of Dissolution
The Articles of Dissolution for Utah LLCs must be filed with the Utah Division of Corporations & Commercial Code [2].
Utah Articles of Dissolution is a short document that contains 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.)
- Any other relevant information
Utah Articles of Dissolution can be filed online or by mail.
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
- An Affidavit for Continuing Authority form
There is no filing fee for filing the Utah LLC dissolution articles during normal processing. However, in our case, we incurred a $75 cost because we wanted expedited processing.
Step 5: Distribute Assets
Distributing assets during the dissolution of an LLC is a critical step that must be handled carefully to ensure fairness and compliance with the law.
The LLC's operating agreement should outline how assets are to be distributed upon dissolution. If the operating agreement doesn't specify this, or if there is no operating agreement, state law will provide default rules.
During our dissolution, we had two members who had made loans to the LLC, so these were paid back before any distribution of remaining assets.
Similarly, if members have made additional capital contributions, these might need to be considered in the distribution.
Step 6: Close All Accounts and Cancel Licenses and Permits
Closing all accounts and canceling licenses and permits is an essential part of winding down an LLC. This process helps prevent future liabilities and ensures that the LLC's affairs are fully settled.
Pay off any outstanding balances and contact the credit card companies or lenders to inform them of the LLC's dissolution and to close the accounts.
Make sure all invoices issued by the LLC are paid and collect any outstanding receivables owed to the LLC.
"LLC members must surrender business licenses and permits, and contact the local government and the appropriate agency to let them know about the dissolution of your Utah LLC."
-Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
During our process, we also notified our insurance providers about the dissolution of the LLC. We canceled liability, property, workers' compensation, and any other business insurance policies.
FAQs
How Much Does It Cost to Dissolve an LLC in Utah?
It costs $0 to dissolve an LLC in Utah since there is no filing fee when submitting the Articles of Dissolution. Expedited service is charged $75.
However, if you hire a professional service provider to help you with the dissolution, the filing fee would be higher.
Can I Dissolve a Foreign LLC in Utah?
Yes, you can dissolve a foreign LLC in Utah by filing an Application of Withdrawal of a Foreign Limited Liability Company and obtaining a tax clearance certificate to the Divisions of Corporations & Commercial Code.
How Long Does It Take To Dissolve an LLC in Utah?
It takes 5 to 7 days to dissolve an LLC in Utah. Expedited service reduces the time to 48 hours.
Can My Registered Agent Dissolve an LLC in Utah?
A registered agent can only dissolve an LLC in Utah 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.
References:
- https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-UT.pdf
- https://corporations.utah.gov/wp-content/uploads/2021/09/dissolve.pdf
