What Forms Are Needed to Dissolve an LLC? (Full Guide)
Dissolving an LLC involves crucial paperwork and legal procedures that demand attention to detail.
Between March 2020 and March 2021, nearly one million establishments shuttered their doors across the United States, as disclosed by the U.S. Secretary of State. Whether you're a business owner seeking to close your LLC or an entrepreneur planning for the future, understanding the needed dissolution forms is vital.
As a Mergers and Acquisitions specialist and a Master’s Degree holder in tax law, I’ve assisted several businesses with the dissolution process.
After consulting with our team of legal professionals, we’ll share our insights on the forms needed to dissolve an LLC.
Quick Summary
- The forms needed to dissolve an LLC include a Certificate of Dissolution and the corresponding final tax returns.
- Once the vote to dissolve is finalized, the LLC should cancel permits and licenses, inform clients and other businesses, settle debts, and liquidate the company assets.
- Depending on the state, it usually takes between 90 and 180 days to dissolve an LLC. The process duration varies based on specific state regulations and any outstanding obligations.
- I advise business owners who intend to dissolve their LLC to seek consultation on how to distribute assets, especially if the company has no operating agreement.
Required Forms for LLC Dissolution
To finish dissolving an LLC, several forms are required and can vary depending on the state where the LLC is registered.
However, here is the general list of common forms that are often required during the dissolution process:
1. Certificate of Dissolution or Articles of Dissolution
The Certificate of Dissolution is a crucial document that officially terminates the existence of the LLC and releases the company from future obligations and liabilities.
When completing the Certificate of Dissolution, provide essential details such as the LLC's name, address, date of dissolution, and the reason for dissolution.
Clearly state whether the dissolution is voluntary or due to other circumstances.
File the completed Certificate of Dissolution with the appropriate state authorities. Pay attention to any specific filing requirements, fees, and deadlines to ensure timely and accurate submission.
2. Federal, State, and Local Tax Forms
You need to file the following forms based on the tax classification of your LLC:
- Single-member LLC: Schedule C Form 1040
- Multi-member LLC: Form 1065
- LLCs taxed as C corp: Form 1120 U.S. Corporate Income Tax Return
- LLCs taxed as S corp: Form 1120-S
In addition to federal requirements, some states may have specific state and local tax forms for LLC dissolution and may include state income tax, sales tax, or other tax-related filings [1].
Since your Employer Identification Number (EIN) is permanently assigned to your business entity, you’ll need to send a letter to the IRS to close your tax account [2].
When I helped a client close their tax account, we included all pertinent information about the LLC, including the business name, address, structure, and EIN.
3. Business Licenses and Permits
Depending on the nature and location of the business, the LLC may hold various licenses and permits to operate legally.
I stress the importance of canceling or terminating these licenses and permits upon dissolution to avoid any ongoing legal obligations or liabilities.
What Is an LLC Dissolution Form?
An LLC dissolution form is a vital legal document to formally terminate an LLC. It serves as an official record, documenting the company's closure and the distribution of assets among members.
The dissolution method varies somewhat depending on the state where the LLC is established and registered. Still, information on adequately closing a firm may be found on the Secretary of State's (SOS) website.
When the LLC is dissolved, it will be necessary to pay a filing or service fee in addition to the LLC dissolution forms.
Some states demand that when an LLC is dissolved, its members must issue a confirmation of cancellation form. California has Form LLC-4/7 as part of its dissolution procedure [3].
How to Dissolve an LLC?
To officially dissolve an LLC, there are certain steps that must be taken to legally terminate the business entity, which include the following:
1. Voting to Dissolve the LLC
Consult your operating agreement to determine how to finalize the dissolution process. In the absence of the document, the members can conduct a meeting and vote on the motion.
2. Filing Articles of Dissolution with the State
Most states require a limited liability company to file Articles of Dissolution to finalize its business affairs.
The filing fee for this process varies by state and depends on whether any transactional documents are required in addition to the filing.
The dissolution process may vary depending on the specific state laws. I advise business owners to consult with the Secretary of State to determine the exact procedure in your locality.
3. Ending Your Business Affairs
As part of finalizing the process of dissolving an LLC, you may be required to wind up other business affairs.
For example, final distributions or sales should be made or any projects should be completed.
You should also inform your clients, customers, financial institutions, and creditors about the dissolution by mailing a Notice of Intent to Dissolve.
"The key to change lies in directing all your energy towards constructing the new, rather than battling the old."
- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter
Read our article for more information about what happens to assets of a dissolved company.
FAQs
How Can an LLC Be Dissolved?
An LLC can be dissolved voluntarily if the owners decide to terminate the business. The state may administratively dissolve a business entity for non-compliance with state laws.
What Happens If You Do Not Formally Dissolve an LLC?
If you do not formally dissolve an LLC, annual fees and taxes will continually accumulate since the state acknowledges the existence of your company.
References:
- https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business
- https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business
- https://bpd.cdn.sos.ca.gov/llc/forms/llc-3--4-7.pdf
