If you have decided to dissolve your LLC in Virginia and no longer conduct business in the state, you will need to take the appropriate steps to do so. This article will provide a step-by-step guide to dissolve an LLC in Virginia and explain why business owners may choose to do so.
Whether you are dissolving your LLC voluntarily or involuntarily, it is important that you understand the process and what is involved.
Steps to Dissolving a Virginia LLC
LLC members of a Virginia limited liability company must take specific steps to dissolve the company. The Virginia LLC dissolution process begins with a resolution of the members stating their intent to dissolve and ends with filing the Articles of Cancellation with the Virginia State Corporation Commission (SCC).
The following is a step-by-step guide on how to dissolve an LLC in Virginia.
Step 1: Follow Your Virginia LLC Operating Agreement
The operating agreement is a written contract between the LLC members, and it's usually kept in the business records. This document will outline how to dissolve an LLC in Virginia and any other business-related issues such as voting, profit sharing, and management duties. The provisions in your operating agreement are legally binding, so read it carefully before attempting to dissolve your company.
Unlike Articles of Organization, Virginia LLC operating agreement is not required by Virginia law, but it is recommended that you create one when starting your business. It is vital to have these legal documents during LLC's dissolution.
Hold a meeting with all members once you have reviewed your operating agreement and determined that dissolution is appropriate for your Virginia LLC. A unanimous vote or a unanimous written consent by all members must be made to dissolve the LLC unless the operating agreement states otherwise.
Step 2: Notify Creditors and Business Associates
If they no longer want to transact business, limited liability companies must notify all known creditors and business associates of the dissolution. This can be done in writing or by publishing a notice in a newspaper.
Business debts must still be paid, even after the company has dissolved. Any assets that are liquidated will go towards paying off these debts. If there is not enough money to cover them, then the creditors can go after the owners' personal assets.
If you want to notify third parties, you can send a written notice or publish a newspaper notice. Virginia does not require this, but it's a good idea to do it if there are people or companies you owe money to, for example, clients and lenders.
Publishing a newspaper notice gives the creditors 30 days from the publication date to claim their debts before being released from liability. Notifying them in writing gives them 30 days from the date of receipt.
Make sure to include all important information in the notice, such as your business name, the date of dissolution, and your contact information.
Step 3: Close LLC Accounts
Keep in mind that if your LLC has a business bank account or credit card, you will need to close them at this time. Additionally, if the company owns property such as real estate and vehicles, they must be sold before dissolving Virginia LLC. All debts should also be paid off before completing the dissolution of the LLC.
Virginia LLC assets must be distributed to the members in accordance with members' ownership interests. If any assets remain after all liabilities have been paid off, they must be turned over to the state.
When all (or most) claims have been paid, any remaining assets can be distributed among members or used toward another goal specified in the Articles of Organization.
A limited liability company must submit a declaration to this effect if remaining assets have been utilized to pay prior obligations. Once all claims are settled, there will be no more money available for distribution among LLC members or stakeholders.
Step 4: Obtain Tax Clearance
Various tax accounts must be closed with tax authorities before the dissolution of an LLC is filed.
You need to file your final tax return, if necessary. To close tax accounts in Virginia, you must pay all outstanding taxes owed to the Internal Revenue Service using Form 1065 and submit a check for the amount due.
You can submit this form at any time before the tax return is due. It's important to state that tax clearance is not required in Virginia, and LLCs do not have tax clearance requirements.
The Virginia Department of Revenue must be notified once all tax obligations are satisfied, as well as any other outstanding taxes owed by your limited liability company.
Step 5: File LLC Articles of Cancellation
Virginia State Corporation Commission requires all LLCs to file Articles of Cancellation before closing business legally. Virginia LLC Articles of Cancellation are one of the key LLC dissolution documents. The form can be found on the State Corporation Commission website.
There is a $25 filing fee associated with this document.
The Articles of Cancellation have to contain your business name, mailing address, registered agent, the reason for the dissolution, and a written confirmation that the dissolution process has been approved by a majority of the LLC members and all affairs wound up.
Once you are done, you need to mail this form to the State Corporation Commission located at Richmond, Virginia, P.O. Box 1197, 23218-1197. It usually takes about two weeks for your Articles of Cancellation to be processed by the state.
You can also file online through the Virginia Secretary of State website or hand them in person at the Virginia State Corporation Commission office.
Once you have filed the Articles of Cancellation, your LLC has been dissolved.
Reasons to Dissolve an LLC in Virginia
Business owners decide to dissolve a Virginia LLC voluntarily for a variety of reasons. However, Virginia also has a few reasons for dissolving an LLC.
Administrative dissolution is the process of dissolving an LLC by order of the Virginia State Corporation Commission.
Voluntary Dissolution of a Virginia LLC
When an LLC in Virginia voluntarily dissolves, it happens for several reasons. The most common reasons for voluntary dissolution include:
- The business owner has reached the end of their retirement and wishes to dissolve the LLC.
- The business has failed financially.
- An event occurred that made it impossible for members to continue running the LLC, such as a death in the family.
- The LLC has become redundant and is no longer serving its purpose.
- A new business owner wants to purchase the LLC in an asset sale. In this case, the existing LLC will dissolve after it transfers all of its assets to the purchasing business entity or individual.
Voluntary dissolution requires a decision by members of an LLC or the LLC's managers.
The decision must be made through a formal resolution and filed with the Virginia Corporation Commission. In order for the dissolution to be effective, all members of the LLC must agree to it. If there is only one member, they may dissolve the company without any other approval.
Involuntary Dissolution of a Virginia LLC
If a Virginia LLC fails to pay the annual registration fee (annual report fee), misses federal taxes, or fails to follow the state's annual report filing instructions, the Virginia State Corporation Commission will involuntarily dissolve the LLC.
The Virginia State Corporation Commission will send a notice of dissolution to all of the LLC's members and managers. The notice will include the date when the LLC will be dissolved (the effective date), how to file a protest and the consequences of not protesting.
The LLC will be dissolved on the effective date. Usually, 30 days after the notice is sent. If the LLC has any assets, they will become part of the state's unclaimed property fund.
The state can sell or liquidate any assets to pay off any debts and/or taxes owed.
The Virginia State Corporation Commission will send a notice of dissolution to the Internal revenue Service, which might lead to an audit or unfiled taxes.
Members and managers must file all required tax returns (federal and state) for any taxable year when the Virginia LLC was in existence, even if the business failed or was dissolved by the state. Minimum business taxes may still be owed, and the state can assess penalties and interest.
If you receive a notice of dissolution from the Virginia State Corporation Commission, it's important to take action right away. You have two options: file a protest or dissolve the VA LLC yourself.
How Do I Dissolve a Foreign LLC in Virginia?
Unlike a domestic Virginia LLC, a foreign LLC in Virginia has to cancel or withdraw its official business from the state. To do that, foreign LLCs have to file a Certificate of Cancellation of a Certificate of Registration (Form 1065) with the SCC.
The LLC must also close all business bank accounts, pay taxes, and settle any other outstanding obligations.
How Much Does It Cost to Dissolve an LLC in Virginia?
To file the Articles of Cancellation for Virginia LLC, owners have to pay $25.
However, if you opt for expedited processing, you will have to pay the filing fee of $200 for the same-day processing or $100 for the next-day processing.
How Long Does It Take To Dissolve a Virginia Business?
It depends on several factors, but your Virginia LLC dissolution can take up to 2 weeks without an expedited fee.
Expedited processing shortens the waiting period significantly because you can choose to have the online filing processed in a matter of hours.
How Do I Cancel a Business License in Virginia?
A Virginia LLC that is no longer in business can cancel its license by filing a Certificate of Termination with the Virginia Department of Professional and Occupational Regulation.
The licenses you will likely have to cancel include a seller's permit, a certificate of authority, and/or a trade name registration.
Does My Virginia Business Need to File an Annual Report After Dissolution?
No. A Virginia LLC has to pay the annual registration fee only if it is active.
After dissolution, the Virginia LLC is considered inactive and does not have to file an annual report. If there are any missed reports, you will have to complete them before dissolution is completed.
Can I Reinstate a Dissolved LLC in Virginia?
Yes, you can reinstate a dissolved LLC in Virginia, but some specific steps and procedures must be followed.
You have to settle any outstanding administrative fees owed to the state and file the reinstatement form with the Secretary of State.
Dissolving an LLC in Virginia: Conclusion
If you have decided that dissolving Virginia LLC is the best course of action for your business, it is important to take the necessary steps to do so. However, this process can seem complicated and daunting if you are not certain about how to dissolve an LLC in Virginia.
Don't hesitate to seek help from a professional service provider or a law firm.
They can provide valuable insight into what needs to happen next after dissolving an LLC, including filing for taxes and setting up protections against creditors who want to take money owed on account of debts incurred by the dissolved company.