Dissolving a Limited Liability Company (LLC)

Dissolving your LLC properly is a critical step to ensure you do not become personally liable for the debts or liabilities of the LLC. If you do not follow all the proper steps to dissolving a LLC, you run the risk of incurring significant tax and other penalties, even when you had no income and no tax due! For example, did you know that for each month or portion of a month your IRS federal tax return is late, you are penalized $195, for a maximum of 12 months multiplied by the number of managing members?

And, if you don’t have a “dissolution agreement” in place between you and the other owners (or members) of the LLC, you run the risk of a former partner doing something to create personal liability for you, or later file a lawsuit against you claiming you harmed them or the LLC.

Steps to Dissolve an LLC

Dissolving a LLC is not complicated, but there are a number of critical steps that MUST be followed:

1. Follow the Operating Agreement (or the law) to wind-down the LLC (i.e. distribute assets and pay off liabilities).
2. Negotiate, finalize and execute a Dissolution Agreement with your partners.
3. Properly notify the IRS (within 30 days) using Form 966.
4. Send Articles of Dissolution to the proper legal authorities (i.e. domestic state and any foreign states).
5. Submit final taxes.

When Should You Start the Dissolution Process?

Technically, you should initiate the dissolution process immediately after the owners, members, or managers have decided to close or dissolve the company. You definitely don’t want to wait too long, especially if you’re approaching year’s end (to avoid having to submit next year’s taxes) or if you have disputes or debates among the owners.

What is needed to Dissolve an LLC?

To properly dissolve a LLC, you need to follow the requirements in the Operating Agreement. If there is no Operating Agreement, then you need to default to what the law is in the domestic state where the LLC is filed. These requirements usually deal with voting percentages for the owners, properly distributing assets, and paying off liabilities.

After handling the formalities of a proper wind-down of a LLC, then you need to file paperwork with the state(s) where registered, with the IRS and to put a dissolution agreement together with all the owners. Specific paperwork includes (but is not necessarily limited to):

• Dissolution Resolution by the LLC
• Articles of Dissolution
• IRS Form 966
• Dissolution Agreement

The Law 4 Small Business service/ filing fee is $199 + state fees.

Some additional options/ services include:

• Standard options for all states:
  • Research fees, taxes and certifications needed or owed to the State (doesn’t include actual fees owed) – (+$129)
  • Partnership Separation Agreement – (+$199)
  • Newspaper Notice to Creditors – (+$125)
  • Dissolution Checklist – (+$29)
  • Template Notice to Creditors – (+$199)
  • Rush Service – (+$175)