When one starts their limited liability company, they never imagine that there could be circumstances in which closing its doors is a possibility. Sadly, this becomes a reality for many and most don’t have the slightest clue as to how to wrap up a business properly. Since notifying creditors and filing paperwork are some of the most important steps in closing your limited liability company, we’re going to break down the process so that one can properly close their business so they can move forward into the next phase of their career.
When It’s Time to Close
When the LLC was formed, documents were filed that let local taxing authorities, the Internal Revenue Service, and the state know that your doors were open to operate business. So unless they’ve been told otherwise, they have no choice but to assume that your business is fully operational and you should be paying your minimum taxes, paying annual fees, and filing annual reports.
By having an LLC dissolve formally, it puts and end to your annual reporting requirements, minimum taxes, and state fees. In addition to this, creditors can take notice that the LLC is no longer capable of taking on debts. A formal dissolution process eliminates the possibility that a lawsuit can pop up later regarding a fine, fee, or unpaid debt from a governmental agency.
Voting & Closing an LLC
To properly close an LLC, a vote is needed by all members of the board. If the LLC agreement has a given procedure on a dissolution, it must be followed. If not, the LLC dissolution that is described in the state’s statutes.
So once a vote has been made, the vote should be memorialized in a resolution so that a written record of such a decision exists. This information must be filed with the official records of the LLC.
Dissolution of LLC & Creditor Notification
So once dissolution has been agreed upon, it’s important to notify creditors that the LLC is closing so claims can be made and deadlines can be met. It’s in the state’s statutes that list deadlines for claim submission, but many fall between 90 and 180 days from notification date. The notice should also state that a claim made after the deadline is subject to being barred.
Some states require that the notification of creditors is required before dissolution paperwork is filed. However, even if this practice isn’t required in your state, it is a great practice to follow. By notifying creditors early, it allows you to take care of any remaining obligations before dissolution takes place – which cuts down litigation or late fees after dissolution takes place.
Licensing & Taxing Notification
When it comes to notification, it’s important to contact local and state taxing authorities so that it can be deciphered whether or not the LLC owes taxes. All companies that your LLC received licensing from must be cancelled and outstanding fees from the licensing must be paid. Once all outstanding obligations have been paid, remaining assets may be distributed to LLC members.
Dissolution Paperwork Filing
Just a paperwork had to be filed with the state to open the LLC, similar paperwork and documentation must be filed in the event of LLC dissolution. This paperwork is filed with the same agency that was used in the formation of the LLC (which is usually the secretary of state.) However, fees and filing procedures vary depending on the state one occupies.
Some states require certification from a tax agency that can confirm that the LLC is up to date on its state taxes. Once filed, this paperwork must be put away with the LLC dissolution paperwork.
If the LLC was registered to operate business in states other than the one it was formed in, documents must be filed with those states to cancel or withdraw the LLC rights to operate in such states. If this step is neglected, it can lead the business liable for taxes, fees, and annual reports even if the LLC is no longer operational.
Another thing one will notice during the dissolution process of an LLC is that they’ll still be responsible for filing the final LLC tax return and the tax returns from final employment – if the information is applicable. If you’re struggling with such information, the Internal Revenue Service offers a checklist of actions that are typically needed when closing an LLC.
It goes without mentioning that closing what started as a vision or a dream isn’t an easy decision. If you have an LLC yourself and the future isn’t looking too bright, it’s important to understand that you can’t just slam on the breaks and shut it down immediately. When going the proper dissolution route to close an LLC, it will help you avoid litigation, obligations, and keep future fees low. At Weisblatt Law Firm, we’re ready (and willing) to help you during this process.