If you've decided it's time to wind up your limited liability company (LLC), don't skip over the steps needed to formally close it down and shut down the business, otherwise known as dissolving it.
If you don't, the firm may be subject to state filing and tax rules and might be taken advantage of by creditors.
Depending on your LLC's circumstances and the state where it is registered, you may be required to submit a variety of forms and documents to the state and the IRS.
What Is an LLC Dissolution Form?
The method of dissolution varies somewhat depending on the state in which the LLC is established and registered, but information on how to properly close 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 form.
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.
If you're canceling your business, you'll need to submit the necessary paperwork in your state for dissolution.
If you want to keep the liability protection provided by the LLC structure when your firm is dissolved, send all of these documents using certified mail and request a return receipt. You'll also want to track down any dissolution papers and make doubly sure they arrive in case you need them later.
Nonprofit organizations and cooperative association entities should not use a dissolution form. They will have to follow their own set of rules for closing their companies.
A final business taxes return and final annual report for tax purposes may be required to finalize the process of dissolving your business. Some states' rules require you to file a final tax return even after closing down, so check with the state where you plan to file dissolution papers, you may also need to pay annual report fees.
In addition, some LLCs need to transact (complete) any final business in order to finalize the dissolution. For example, you might need to sell off remaining assets or distribute them among your members. You may also want to complete any final projects before you dissolve.
On top of final tax returns and final transactional activities, an LLC cancellation form must be filed with the state where it is registered to finalize the process. For tax purposes, some states require final annual reports from LLCs to finalize dissolution proceedings.
In order to finalize the process of dissolving your business, you may be required to submit a final tax return and an LLC annual report with the state where you've registered your company.
Ending Your Business Affairs
As part of finalizing the process of dissolving an LLC, you may be required to finalize other business affairs. For example, final distributions or sales should be made or any final projects should be completed before finalizing the process.
Additionally, final tax returns and annual reports are sometimes required for tax purposes.
Voting to Dissolve the LLC
The process for finalizing the process of dissolving your LLC will vary depending on state law.
For example, some states don't require members to vote to dissolve their businesses or take any formal action at all.
They can simply pay filing fees and transact other activities to finalize dissolution proceedings without returning to the operating agreement.
Other states' laws require a member to vote if the LLC has more than one member or if any of the members disapprove of dissolving.
Many states require unanimous consent in a written consent form to dissolve an LLC based on the LLC operating agreement.
You may also need to submit a transactional document, such as a transactional certificate with your cancellation form if the company was qualified to transact business in other states.
Filing Articles of Dissolution with the State
If the closing of your Limited Liability Company is not covered by state laws, owners may need to submit this article to the Secretary of State (SOS).
Most states require an LLC to file this article 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.
If your state doesn't require LLCs to transact final business affairs, then you may instead need to complete transactional documents with the SOS.
You'll also want to make sure all of your subsidiary LLCs are complying with dissolution requirements if they exist.
Divesting yourself into subsidiary organizations can become complicated. Your state's SOS should be able to help you with this process.
Notifying Creditors in
If you have outstanding debts or you've been named in a lawsuit, then your state's law may require that you notify creditors of the dissolution.
Most states will only require notification to creditors if there are any outstanding claims against your business.
Your state law should indicate whether creditors should be notified about the business' dissolution process.
Filing Tax Forms with
Your LLC's tax return will be due on your business' regular filing date, but you will also need to file a tax return if your state requires one.
If this is the case, then you'll want to submit transactional paperwork such as transactional certificates with your cancellation form.
Doing so will expedite the process and get it back to you faster.
Make sure you update transactional documents, such as transactional certificates with your dissolution paperwork for tax purposes if they need updating.
You must know that you'll need to notify the IRS of your dissolution filing, even if your state doesn't require transactional paperwork. You can also submit transactional paperwork with your tax return or rely on transactional documents for this particular process.
If you choose to file transactional documents with your tax return, then make sure they are submitted by the return's due date.
In addition, if your Limited Liability Company is suspended and you plan to dissolve it, the Internal Revenue Service may request that you file a Corporate Dissolution or Liquidation (Form 966) notification with them.
The Internal Revenue Service provides a Closing a Business Checklist of other potentially required forms on its website. If your LLC has employees, for example, you must submit a final Form W-2 to free you from any tax liability.
If your Limited Liability Company isn't incorporated, you'll have to handle the dissolution process on your own. You may also want to seek advice and help from a transactional lawyer or a law firm as you go through these procedures.
Although dissolving a Limited Liability Company is time-consuming, it's worth it for the sense of security knowing that you may move on to your new business without worrying about old ones coming back to haunt you in the form of paying business taxes, penalties, and creditors' claims.
FAQs
What Form Is Used to Dissolve an LLC?
The forms needed to dissolve an LLC vary by state. If you're managing your dissolution process on your own, then transactional forms like transactional certificates should be used with the filing of articles of dissolution.
If you choose instead to hire a transactional lawyer to assist you with this procedure, then consult with one before getting started so that you can work out a plan of action.
You'll also need to establish if transactional forms will have to accompany your filing or if transactional documents are required by other subsidiary LLCs.
What Should Be Included in Dissolution Notices?
In addition to the articles of dissolution, you may want to include transactional affidavits as part of your filings with the SOS.
These forms will be beneficial to you and your company if transactional paperwork is required by your state or other subsidiaries LLCs.
How Long Does It Take To Dissolve a Limited Liability Company?
The length of time varies, and it's up to you and the transactional lawyer that you hire to determine when all documentation has been submitted.
What Are Transactional Documents?
Transactional documents are transactional certificates, transactional affidavits, transactional resolutions, corporate transactional records, or transactional filings.
How Much Does It Cost to Dissolve an LLC in California?
Transactional filing fees vary by state. You may also be subject to transactional attorney fees rather than transactional filing fees, which will increase the amount that you'll need to payout.
LLC Dissolution Forms: Conclusion
In conclusion, make sure to file dissolution papers in each state where your Limited Liability Company is registered to operate. If your LLC has made any final income tax returns or employment tax returns, you'll also need to file them.
On the IRS's website, look for a list of actions you must take to dissolve an LLC.
Make sure you film Form 966 and Forms LLC-4/7/8 (if required). Make sure the transactional tax clearance is signed, stamped, and submitted with your dissolution papers.
