When a business is no longer viable, or the owners want to move on to other opportunities, dissolving an LLC in Washington State may be the best option.
This article will provide a step-by-step guide on the dissolution process and highlight some of the reasons why business owners may choose to dissolve a Washington limited liability company.
Steps to Dissolving a Washington LLC
A Washington LLC dissolution begins at a company level. That means that LLC members have to go through an internal process before moving to the state level and filing the legal papers with the state.
Keep in mind that any mistakes made during this process could result in delays, fines, or legal complications. For this reason, we highly recommend that you consult a lawyer to help you through the dissolution process if you have doubts about the process.
Step 1: Follow the LLC Operating Agreement
Wind-up measures begin with following the LLC's operating agreement. This document outlines how the dissolution should occur and includes specific steps that must be followed. If the limited liability company doesn't have an operating agreement, state law will dictate how to dissolve an LLC in Washington State.
If you're not sure where to find your LLC's operating agreement, check with the company who registered it - usually a business attorney, registered agent, or online service.
Once you have your LLC's operating agreement, review it to see how the dissolution process is supposed to work. Then follow those steps carefully.
If there are any disputes over the dissolution of your Washington LLC, they should be settled through arbitration as outlined in the operating agreement or by a court if one isn't specified.
Step 2: Obtain Tax Clearance
Every Washington business has to submit a Revenue Clearance Certificate Application at the Washington Department of Revenue. Note that the revenue clearance certificate form is for tax clearance in connection with the dissolution of a business only.
You have to submit the Revenue Clearance Certificate Application because once you dissolve your Washington LLC, all debts remain with the company.
So if your Washington LLC still has tax obligations, the state will come after you. In order to obtain a tax clearance certificate in Washington, your LLC must be current on all of its business taxes and fees and fulfill all fiscal obligations.
It's important for you to file all missing reports and pay any past due amounts before filing the Revenue Clearance Certificate Application form, or else it won't be approved.
In the event that your company has outstanding taxes, you can work out a payment plan to pay taxes with the Washington Department of Revenue.
The information you will have to provide in your Revenue Clearance Certificate Application contains your business name (LLC name), federal tax ID number and Unified Business Identifier (UBI number), mailing address, and contact information.
You can find the Revenue Clearance Certificate Application form on the Washington Department of Revenue website. The only way you can send it is by mail.
Step 3: Notify Third Parties
Initial actions of the Washington LLC dissolution involve notifying creditors, lenders, business partners, and clients. The business should notify these parties that it is going out of business. Notify them immediately so they can submit claims for any business debts owed to them by the Washington LLC.
In addition, the business must provide creditors with a mailing address where they may send their claims. By notifying creditors and providing a mailing address, the business gives them time to submit their claims.
It is important that you communicate with business creditors and lenders even after you submit your Articles of Dissolution because they may have business debts owed to them by your LLC.
The business will also want to notify clients and business partners about the dissolution so they can plan accordingly for future transactions or projects.
In addition to business debts, business creditors who have provided services or products to the business may also have claims against the business. These types of business creditors include service providers like accountants, lawyers, and contractors. The business should notify these parties about their dissolution so they can submit valid claims for payment.
Step 4: Settle Remaining Debts
After a Washington company closes all business accounts and ceases business activities, remaining assets must be used to settle remaining debts.
If there are remaining debtors, the company is responsible for notifying them of the dissolution and providing instructions on how to file a claim against remaining assets.
After all (or most) claims have been satisfied, any remaining funds can then be distributed among members or allocated toward another purpose stipulated in the Articles of Organization.
If remaining assets were used to pay remaining debts, the company must submit a statement certifying that it has no remaining assets at its disposal. In this case, there will be no remaining funds to disburse among members or stakeholders once all claims have been satisfied.
Step 5: File LLC Certificate of Dissolution
The last step in the Washington LLC dissolution process is to file a Certificate of Dissolution with the Washington Secretary of State.
Washington Secretary of State Corporation Division offers a fillable PDF Certificate of Dissolution form on their website.
Once downloaded from the website, the completed certificate can be filled out by hand, mail, or in person. In this form, you need to provide:
- LLC name and ID number
- Date of dissolution (which is the effective date)
- Signature of LLC representative
- Name and address of the registered agent
Washington Secretary of State will charge a $20 filing fee.
Once the form is filled and submitted, you should receive a confirmation by email of your Washington LLC dissolution in approximately five (business) days.
Reasons to Dissolve an LLC in Washington
Business owners may decide to dissolve a Washington LLC, or the Washington Secretary of State can dissolve it against their will. If companies decide to wind up their operations, we are talking about voluntary dissolution.
On the other hand, when the Washington Secretary of State dissolves a company, that is called involuntary or administrative dissolution. In both cases, there are many reasons why dissolution may occur.
Voluntary Dissolution of a Washington LLC
LLC owners decide to dissolve an LLC in Washington State voluntarily for a variety of reasons. The most common reasons include that the Washington LLC is no longer needed, the members have disagreements and cannot work together, or the company faces financial difficulties.
To dissolve an LLC in Washington State voluntarily, you will need to file a dissolution form with the Secretary of State.
The Certificate of Dissolution must include basic information about your LLC, such as its name and registered agent, as well as the date on which you wish for your LLC to be dissolved.
You can't simply walk away from the company as the LLC's debts and obligations will still need to be taken care of. In most cases, the company's assets will need to be sold, and the proceeds will be used to pay off any outstanding liabilities.
Once all debts and obligations have been paid, the remaining members will distribute what is left of the company's assets.
However, a Washington LLC is formally dissolved only when the Washington Secretary of State issues the Certificate of Dissolution.
Involuntary Dissolution of a Washington LLC
The Washington Secretary of State (Washington Corporation Division) can dissolve a Washington LLC if it fails to obtain business licenses and renew them, fails to send the annual report in due time, misses taxes, or otherwise loses its good standing with the state.
The Washington Secretary of State, upon a petition or complaint of any person and after notice to the LLC and an opportunity for a hearing, may dissolve any Washington LLC that has failed to stay compliant with state law.
In a similar fashion, a court can enter an order dissolving a limited liability company upon application by the attorney general or any member or manager if "it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement."
A Washington LLC can also be involuntarily dissolved by court order if the LLC has filed articles of organization that contain false or misleading information.
If you are facing the administrative dissolution of your Washington LLC, it is important to take action quickly and protect your business.
How Much Does It Cost to Dissolve an LLC in Washington State?
Hard copies of the Certificate of Dissolution are free. However, online filing is charged $20. You can also request expedited service. These services are charged an additional $50 filing fee. This shortens the processing period drastically.
How Long Does It Take To Dissolve a Business in Washington?
The state takes approximately two weeks to dissolve a Washington LLC, provided that the Department of Revenue and Secretary of State receive all required documents in a timely fashion and with correct information.
Can You Sue a Dissolved LLC in Washington State?
Yes, but only within a three-year frame after the dissolution becomes effective. That is how much time claimants have to settle their claims. After three years, a Washington LLC is considered to be dissolved entirely and cannot be sued.
The dissolution process might start immediately once you file your certificate of dissolution with the Secretary of State; however, it can take up to seven months to finalize all requirements. If there are pending lawsuits against the company during dissolution, they will continue until a judgment is reached.
How Do I Close a Business License in Washington State?
Washington Department of Revenue (DOR) handles licensing and tax requirements for businesses in Washington.
Once you create an online account through their website, you can find specific instructions on filing the forms to close licenses. Only corporations need to send the Revenue Clearance Certificate from the Department of Revenue before they can close accounts.
Do Washington LLCs Need Tax Clearance Before Dissolution?
No. Only some states require tax clearance before dissolving an LLC, and Washington is not one of them. Keep in mind that you will need your federal tax ID number (EIN) for dissolution paperwork, though.
What Does Administratively Dissolved Mean in Washington State?
If an LLC fails to submit an annual report or loses the good standing status with the state, the Washington Secretary of State will administratively dissolve the LLC. This means that the LLC is no longer in good standing with the state, and it can't conduct any business in Washington.
The company may still exist on paper, but it is not authorized to do anything until it re-establishes good standing with the state.
Can I Dissolve a Foreign LLC in Washington?
A domestic Washington LLC is dissolved while foreign LLCs are canceled. In these instances, a Washington corporation or LLC files the Certificate of Cancellation.
There is no filing fee to cancel foreign corporations of LLCs, and the process can be completed in a matter of days.
Dissolving an LLC in Washington State: Conclusion
If you are a business owner in Washington State and have questions about how to dissolve an LLC in Washington State, please do not hesitate to contact an experienced professional or a law firm.
They can provide advice on the best way to proceed with dissolving your business entity in order to comply with state regulations.
Speak with them for more information about what steps need be taken when dissolving any company in Washington, including corporations, limited liability companies, partnerships, and sole proprietorships.