How Long Can an LLC Operate?

By Larissa Bodniowycz, J.D.

How Long Can an LLC Operate?

By Larissa Bodniowycz, J.D.

A limited liability company (LLC) is a popular business form for small businesses because it protects their owners, called members, from personal liability. Members create a limited liability company by filing articles of organization with the Secretary of State. Once formed, the company generally exists indefinitely and can operate for as long as desired. When the owners want to close the business, they must dissolve it.

Businesspeople around conference table

Reasons for Dissolution

An LLC can officially end its operations and existence through a process called dissolution. The company's articles of organization or operating agreement might provide a specific date or event when dissolution will occur.

If the articles or operating agreement does not provide any such trigger, the business might dissolve for one of two main reasons: a voluntary decision of the company's members or a court order.

Voluntary Dissolution

The members of an LLC may choose to dissolve it for a variety of reasons. It may not be practical to continue the business' operations, the owners may disagree as to the management of the business, or they may simply want to move on to other business ventures.

The members likely have to vote, with some majority required to approve the dissolution, depending on the jurisdiction and the provisions of the company's articles of organization or operating agreement. These documents might call for a majority, ⅔, or unanimous vote to dissolve the business voluntarily.

Judicial Dissolution

In some cases, a court orders the dissolution of an LLC. The business' owners may seek to dissolve it through the court system if it is no longer financially feasible or if the company cannot achieve its stated purposes, making it no longer practical to continue operating.

Alternatively, an owner might request that a court dissolve a business if it has engaged in illegal business activities or perpetrated a fraud or crime. A state government authority, such as a state's attorney general, may also petition the court for the dissolution of a business that is not complying with state regulations.

Continuing Operations After a Member Leaves

Unless the operating agreement provides otherwise, a multiple-member LLC does not have to dissolve when one member leaves. If one owner wants to leave the business, but the others want to continue the business, that one person may choose to withdraw, or dissociate, from the company.

After dissociating, the parting individual cannot participate in the business' management. It is important to note that this person may remain on the hook for any debts or obligations the company accrued prior to their dissociation.

Dissolution Process

Properly dissolving an LLC requires the business to wind up its operations in accordance with state law and its operating agreement and file articles of dissolution with the Secretary of State in the state where it formed.

Winding up involves settling the company's open business, disposing of its property, discharging any outstanding debts and wrapping up its finances, and distributing the business' remaining assets to its creditors and owners. The articles of dissolution provide notice of the company's termination of business and formally terminate its existence with the state. Once winding up is complete and the state accepts the articles of dissolution, the business no longer exists.

Failure to dissolve an LLC properly can subject the company and its members to additional taxes, fees, and liabilities. If it's time to close your company, consult your operating agreement and follow the steps for the form of dissolution that is best for your circumstances.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

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