How to Dismantle an LLC

By Lisa McQuerrey

A limited liability company, or LLC, is a business designation that allows its owners, known as members, to maintain limited personal liability for the actions of the company. Dismantling an LLC involves a number of steps that are similar to the process of closing any business entity. Members should review the LLC’s original operating agreement, which typically details the process for dismantling the LLC. If there is no agreement or no such provision exists, it falls to a majority vote of the members to approve the dissolution and to create a timeline for formal closure and dismantling.

Finalize Business Contracts

Once you decide to dismantle an LLC, stop taking new projects or orders and inform clients, customers and vendors of your plans to cease operations. Make plans to complete projects and finalize all invoices.

Notify Employees

Depending on your LLC employment figures and the regulations of the state where your company is based, you may be required through the Worker Adjustment and Retraining Notification Act to provide employees with 60 days notice of business termination. Before final business operations cease, you will need to pay employees all outstanding earnings and file final employee pension, payroll and tax paperwork.

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Notify Service Providers

You will need to give notice of your impending closure to companies and individuals that provide services to your LLC. This includes utility companies, office machine rental companies, suppliers and vendors. Settle all debt before finalizing the dismantling of your LLC.

Distribute Company Assets

You will also need to liquidate assets and divide proceeds among the LLC’s members based on the percentage of ownership each member holds. Disposition of assets should have been outlined in your original operating agreement. If no such provision exists, consider options such as a liquidation sale or liquidation auction. Once LLC assets have been distributed and all debt finalized, close out financial accounts including credit cards and bank accounts.

Complete Final Tax Paperwork

A final tax return should be filed with the IRS and potentially with state governing agencies, if required. You will need to report earnings, losses and detail how the LLC’s assets were distributed among members. All outstanding taxes must be paid before the LLC can be officially dismantled.

Notify Appropriate Governing Agencies

Once a final date of business has been established, notify local, state and federal business licensing agencies of your closure. Cancel business licenses and notify the U.S. Internal Revenue Service about discontinuing use of your tax identification number.

File Articles of Dissolution

Articles of dissolution officially cease the existence of your LLC. Articles are typically filed with the secretary of state. An LLC member can file the articles or a legal representative or document services company can file the articles on the LLC’s behalf. A copy of filed documents should be provided to each LLC member.

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Maryland's LLC Dissolution Law

References

Related articles

Canceling an LLC

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.

Can a Creditor Collect if an LLC Is Dissolved?

Circumstances might arise under which a creditor can collect debt from a dissolved limited liability company. As such, it is essential for business owners to follow the steps necessary to properly dissolve the company and be aware of situations where creditors may collect distributions that have already been allocated to LLC members.

How to Collect a Judgment in Michigan if an LLC Is out of Business?

A limited liability company is a business entity that protects its owners, known as members, against personal liability for business debts. Under Michigan's Limited Liability Company Act, an LLC that closes down its business can establish a date past which creditors are barred from pursuing claims against the company or any assets that may have been distributed to members. Collecting a judgment against a dissolved LLC in Michigan depends upon whether the LLC followed the dissolution rules, whether the judgement was obtained before or after the date of dissolution and whether the judgment creditor informed the LLC of the claim in a timely fashion.

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