All business activity must be done by a proper procedure, and if not done properly, then the company may face some consequences. The same is the case with dissolving an LLC. The need to dissolve a business can arise due to several circumstances such as the death of a member, the goal of the business having been met, or many other reasons. Whatever your reason, if you want to dissolve your LLC, you are required to follow a defined set of procedures to do so. 

You will be protected from potential liabilities and can move ahead in your life quickly if you follow the correct dissolution procedures. You can focus on your future projects and finish them fast by wrapping up your old business quickly. This article is best for those who want to dissolve their business as this article will provide you with detailed steps to dissolve your LLC. If you also ponder the question, “Can I dissolve an LLC online?” then you will find your answer here shortly because all your doubts regarding an LLC dissolution are mentioned below in detail. If you’re looking for a perfect checklist for dissolving an LLC and a step-by-step guide, then you have reached the perfect destination. If you don’t want to miss some important details, then you must read this article till the end. Reading this article to completion will eliminate any confusion regarding the LLC dissolution steps. 

LLC Dissolution 

Firstly, we will get to know what the term LLC means. An LLC, also called a Limited Liability Company, is a business structure that safeguards the personal assets of the business owner. Personal assets such as a house or a car are protected from business debts and liabilities. This means if you are unable to pay your business debts, then the debt cannot be recovered by acquiring your house or your car. In simple words, if you have followed all the rules and regulations properly, you cannot be held liable for anything that goes wrong with the business. 

There can be various reasons why someone might want to dissolve an LLC. If you’ve registered your LLC, then you are required to file annual reports and pay annual fees and taxes. All these things show that the LLC is active. If you want to save these charges and be safe from future lawsuits, then dissolving your LLC can be a pretty good idea. An LLC can also be dissolved when the members of the LLC vote to close the business for any reason. They can also want to dissolve the LLC if any member of the LLC dies, and it was mentioned in the agreement that the death of a member will lead to the dissolution of the LLC. Moreover, an LLC can also be dissolved by the court or the Secretary of State in case of any violation of the laws or failure to pay taxes. 

Following proper procedures to dissolve an LLC is extremely important. If you fail to follow all the steps correctly, you are most likely to face legal charges and penalties. Unprofessional LLC dissolution may lead to legal and tax issues which can charge you even more than the correct procedure. If you want to avoid all these penalties, you must follow all the steps of an LLC dissolution accurately. 

Steps to Dissolve an LLC

All the steps to dissolve an LLC are divided into the phases of dissolution. All these phases are described below in detail. 

Preparing for an LLC Dissolution

Step 1: Review your Operating Agreement

The first step to dissolve your LLC is to check the operating agreements and review the dissolution clauses mentioned in the agreement. The operating agreement outlines the triggers to dissolve an LLC. Also, the procedures to dissolve an LLC are mentioned in the dissolution clauses. Moreover, you are needed to determine voting requirements for member approval for an LLC dissolution. Only after you have checked all these things can you move on to the next step. 

Step 2: Notify Stakeholders

The next step to dissolve your LLC is to notify the stakeholders of the LLC. If you’ve decided to dissolve your LLC, it’s your responsibility to inform the members, creditors, and employees of the company about the dissolution. You should also clear outstanding debts and contracts, and for that, you must notify your creditors about the process of submitting claims and the deadline for doing so.

Step 3: Gather the Necessary Documents

After you’ve settled the debts of the creditors and employees, you’re required to gather the necessary documents to dissolve your LLC. You have to obtain tax clearance certificates from the relevant authorities to state that you have no taxes due. For that, you will need to file tax returns with your state. Furthermore, you will also have to collect financial records and legal documents to keep them safe for future consideration.

Formalizing the Dissolution 

Step 4: File Articles of Dissolution

The dissolution process officially starts when you file articles of dissolution in your state. The articles of dissolution are the legal documents in which you demand your state to dissolve your LLC. You can find the appropriate form for your state at the Secretary of State or the state’s corporations division’s website. After you access the form, you must complete the form and submit it to the Secretary of State. You will also have to pay a fee for the dissolution of your LLC. 

Step 5: Publish a Notice of Dissolution

The next step is optional in the LLC dissolution process and entirely depends upon the owners whether they want to publish a notice of dissolution or not. You can post the news about the dissolution of the LLC in a newspaper of general circulation to inform the creditors. Before publishing the information in a newspaper, you must check the state requirements for publication length and frequency. Publication frequency refers to the time of publication, such as morning, evening, monthly, quarterly, or annually. 

Winding Up the Business

Step 6: File Final Tax Returns

In some states, to file dissolution documents, you are required to get a clearance certificate from the state and get verification for good standing from state tax agencies. You are required to complete both state and federal tax returns for the final business period. If you want to file your final tax returns accurately, you must consult with a tax professional as they have experience in this field and can give you the best advice for filing and potential tax liabilities.  

Step 7: Distribute Remaining Assets

Assets play a vital role in the functioning of a business, and after the closure, they should be distributed precisely. After you’ve cleared all your dues, filed tax returns, and got a clearance certificate, you are required to distribute the remaining assets among the LLC members. The remaining assets could be in the form of profits, investments, or tangible goods. The information about the distribution is mentioned in the operating agreement of the LLC. If the LLC doesn’t have an operating agreement, it can refer to the state law to distribute the assets among the members of the LLC. 

Finalization and Post-Dissolution

Step 8: Cancel Business Licenses and Permits

These remaining steps come under the post-dissolution phase of the LLC dissolution. After you have completed all the above steps successfully, you will have to inform the relevant authorities about the dissolution of your LLC. You will also need to cancel all the active business licenses and permits and surrender them to the authorities. This is a significant step in LLC dissolution as it informs the authorities that the business has been closed and is no longer active in the state. 

Step 9: Close Bank Accounts and Business Lines of Credit

You are also required to notify the banks and financial institutions about the dissolution so that you can close your bank account. If you leave your account open after the dissolution, you might have to bear its annual charges. If you have any business-related lines of credit or credit cards in the name of your LLC, you should also cancel them all after the LLC is dissolved. 

Step 10: Maintain Records for a Set Period

Lastly, you must consult an accountant or a lawyer while maintaining the records of your company. They have better knowledge of the laws and can tell you the documents you need to keep and the ones you need to dispose of. You will need to store the financial and legal documents for a recommended time frame, as the state authorities might ask you to submit a document later. The unnecessary documents need to be disposed of securely to keep the vital information of the company safe. 

Conclusion – Get Expert Assistance in Dissolving Your LLC

Dissolution of an LLC is a bit of a task and, if not done correctly, may result in legal charges and penalties. As mentioned above, the answer to the question of the online dissolution of the LLC is ‘Yes.’ An LLC can be dissolved online by filling out the dissolution form on the Secretary of State website. If you’ve also decided to dissolve your LLC, then you’re required to follow the steps above accurately. The steps to dissolve an LLC are divided into four phases, namely preparation for an LLC dissolution, formalizing the dissolution, winding up the business, and finalization and post-dissolution. These phases are further divided into the steps to dissolve an LLC. If you follow all the above-mentioned steps properly, you are less likely to face any problems, legal charges, or penalties. If you want further assistance contact IncParadise.