Canceling an LLC

By Elizabeth Rayne

A limited liability company, an independent business entity formed under state law, comes into existence when a business files articles of organization with the state. The owners, or members, of an LLC are not personally liable for the business's debts. After making the difficult decision to close your LLC, you should dissolve the corporation in accordance with state law to start your next business venture unencumbered.

State Regulations

Refer to your state's LLC statute to properly dissolve the corporation. Often, you may find the relevant information and forms on the website of your state's secretary of state. LLC owners simply may not close up shop and walk away from the business, and it is essential to correctly follow your state's dissolution procedure. If you fail to do so, the LLC and its owners may continue to be responsible for taxes, state filings and licensing fees for the business.

Vote to Dissolve

In most cases, the members of an LLC vote to dissolve the company. If you have an operating agreement for the company, it may specify when and how the company may close. Some agreements provide a specific closure date, or may state how many members should agree to dissolve the company. When voting to close the business, record the decision in the corporation's official documents. LLCs owned by a sole individual may close at the owner's discretion.

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Tax and Dissolution Filings

An LLC should clear all outstanding tax requirements and file articles of dissolution to effectively close the business in most states. You may file final tax returns with the state and the IRS. Consider indicating on the forms that the tax documents are the business's final returns. Your state may require you to make additional sales tax filings. If you have employees, confirm that you have paid payroll taxes. You also may notify the state that the LLC is closing by filing articles of dissolution, usually with the secretary of state. The state may charge your business a fee to file the dissolution.

Winding Up Affairs

Consider notifying your LLC's creditors and lenders that the business will be closing and create a plan to address any unresolved or potential future debts. If the LLC still holds assets after debts have been paid, return the remaining assets to the corporation's members who previously have not been repaid. Once they have been paid, distribute the remaining assets to all the members equally.

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How to Dismantle an LLC
 

References

Related articles

Maryland Statute to Dissolve a Company

The Maryland business code contains a statute for each type of independent business entity that can be formed under state law, including corporations, limited liability companies (LLCs), partnerships, limited partnerships (LPs) and close corporations. Each business statute contains provisions that detail procedures for dissolving each type of company. Although dissolution procedures under each statute are particular to the specific entity type, there are some common factors across all of the statutes. Maryland law is designed to ensure dissolving businesses pay creditors, provide notice of the closing so people can make claims, and distribute the remaining assets equitably.

What Happens to Your EIN When Dissolving a Corporation?

When you formed your corporation, you applied for an Employer Identification Number (EIN) from the Internal Revenue Service. This number uniquely identifies your business, and it is used on federal tax filings and all other correspondence with the IRS. State government agencies also typically require the use of the EIN on tax filings and correspondence. If you are thinking about winding down the business of your corporation, you might wonder what will happen to your EIN and whether it terminates when your business is dissolved.

Dissolution of Sole Proprietorship

When it comes time to discontinue the operations of a business formed as a sole proprietorship, owners may find obstacles that prevent them from simply walking away from the company. This is due to the fact that, throughout the life of the organization, the assets and liabilities of the business have become intermingled with the assets and liabilities of the individual owner. The result is that complete dissolution of a sole proprietorship may be more of a challenge than with other business entities.

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