Reasons for Voluntary Dissolution of LLC

By Anna Assad

A limited liability company, or LLC, is legally formed once the initial articles of organization are filed by the organizing members with the state business department. The business continues to exist unless voluntarily dissolved by the actions of its members, or is involuntarily dissolved by judicial order or another event as dictated under state laws.

A limited liability company, or LLC, is legally formed once the initial articles of organization are filed by the organizing members with the state business department. The business continues to exist unless voluntarily dissolved by the actions of its members, or is involuntarily dissolved by judicial order or another event as dictated under state laws.

No Money

An LLC may voluntarily dissolve if the business venture has failed. If operating expenses consistently outweigh profits, the members may not be able to afford to continue operating the business at a loss, as the LLC was founded on contributions from the organizing members. Not all members may wish to dissolve; however, depending on the articles of organization and bylaws of the LLC and the state laws where the LLC is headquartered, a unanimous vote for dissolution may not be required.

Ready to start your LLC? Start an LLC Online Now

Problems With Members

The LLC members may agree to dissolve the business due to internal problems, such as disagreements among members about the business management, operation and direction. Personal matters experienced by one or more members, like a death of an immediate family member, bankruptcy, financial disaster or medical illness, may make operating the LLC difficult if the affected members performed key business functions.

Triggering Event

A dissolution event stated in the initial articles of organization qualifies as a voluntary dissolution in some states. Dissolution events are happenings that the articles stipulate will end the LLC upon occurrence, such as the death of an organizer, loss of a particular asset or a vote. Normally, the death of a member will not trigger the dissolution of an LLC if other members still remain, but the initial articles of organization may include the provision.

Stagnant Business Growth

An LLC may be voluntarily dissolved if the members feel that the company is not growing, expanding or performing the service for which it was originally intended. The business may be making a profit, but members are generally required to be active in the management, a task that may be difficult if the members feel the company is not moving forward or cannot achieve total success.

Ready to start your LLC? Start an LLC Online Now
Business Life Cycles of an LLC

References

Related articles

Laws on How to Use LLCs

Each of the 50 states and the District of Columbia establishes its own rules and regulations that govern the creation and operation of limited liability companies. However, most regulations are fairly uniform and reflect the principles of the Revised Uniform Limited Liability Company Act, or RULLCA. The RULLCA does not limit the type of businesses eligible to use the LLC structure.

How Long Can an LLC Operate?

One of the notable benefits for creating a limited liability company for your business is its inherent indefinite life. Most jurisdictions only force the closure of the LLC in very limited circumstances. When an LLC dissolves and ceases business operations, it is generally the result of members deciding that it is not practicable to maintain business operations in the current form.

What Is a Pro Rata Share for an LLC?

LLC is the abbreviation for limited liability company, which is an unincorporated business structure created under and governed by state law. If formed correctly in accordance with state law, the LLC is a legally recognized entity that allows the owners, who are called members, to enjoy limited liability and tax treatment similar to that of a partnership. This means that members incorporate business revenue into their personal income taxes. This is called flow-through taxation because the revenues and deductions flow from the business entity to the individual members. Given membership structure and tax treatment, to determine how to allocate profits, deductions, expenses and losses, many LLCs provide for distribution based on a member’s pro-rata share.

LLCs, Corporations, Patents, Attorney Help

Related articles

Why Dissolve a Limited Liability Company

A limited liability company’s dissolution is the process of permanently winding up the affairs of the LLC. Once ...

New Jersey Statutes Limited Liability Company Act

New Jersey permits business owners to form limited liability companies, or LLCs, and any substantive legal issues ...

LLC Rules & Guidelines

Entrepreneurs who wish to create a limited liability company for their business must adhere to the prevailing laws of ...

Can an LLC Be a Joint Venture?

Jurisdictions within the United States allow for the creation of a limited liability company structure to run the ...

Browse by category
Ready to Begin? GET STARTED