Closing an LLC After Bankruptcy

by Tom Streissguth
State laws call for a legal dissolution if it's time to close the shop.

State laws call for a legal dissolution if it's time to close the shop.

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There are several steps you need to take in order to carry out a legal dissolution if your LLC is closing down after filing for bankruptcy protection. You must get approval from all LLC members, and file the necessary forms and articles with state and federal agencies. The distribution of assets and payment of creditors is usually determined at the dissolution stage, but the bankruptcy court may have already taken a hand in this. Consult an experienced business attorney if you have any questions on the specific procedure in your state.

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Step 1

End business operations and obtain written approval from all members of the LLC on a plan of dissolution for the company.

Step 2

Verify that state taxes and fees have been paid by the LLC to the proper agency, if your state law requires this step be taken before dissolution. The IRS requirements are outlined on its website (see Resources), and include final tax deposits, employment tax forms, wage and withholding information, capital gain or loss reports, pension and benefit plan information, 1099 payments and information, and asset sales or exchanges.

Step 3

File IRS Form 996, which declares the dissolution of the company for federal tax purposes. The IRS requires this form to be filed no more than 30 days after the LLC adopts a plan of dissolution. You must provide the federal tax ID number, the date of dissolution and the Articles of Dissolution filed with the state.

Step 4

File the required Articles of Dissolution with the state agency that registered your LLC. You must also file a notice in other states where the LLC has been registered to do business. The Articles should include the reason for the dissolution, as well as information on the bankruptcy and any other pending court actions. Send this notice to business partners, creditors and all partners with an interest in the company.

Step 5

Carry out a complete inventory of the LLC’s remaining assets, if any remain outside the jurisdiction of the bankruptcy court. This can include land, equipment, vehicles, and intellectual property such as patents and copyrights.

Step 6

Verify the operating agreement that was drawn up when the company was formed with your partners, managers, members and anyone else that has an interest in the company. LLC operating agreements generally describe the division of assets, if any remain, on the dissolution of the company.

Step 7

Distribute the remaining assets according to the agreement, after any creditors outside of the bankruptcy proceeding have been satisfied. This may include passive investors who have extended loans, landlords, and federal and state tax agencies. All distributions must be reported to the IRS.