What Happens When a LLC Dissolves?

By Holly Cameron

An LLC, or limited liability company, operates according to the statutory rules of the state where it is registered. Although each state has its own individual laws relating to the setting up and operation of LLCs, most apply similar rules when an LLC dissolves. In addition to the legal rules, the members of an LLC often enter into an operating agreement when they set up the company; this agreement usually contains specific provisions for dissolving the LLC.

Dissolution by Operation of Time

When setting up an LLC, the members may decide that the company shall only continue in existence for a specific period of time. They can specify the period in the LLC’s articles of organization. For example, chapter 1705.43 of the Ohio Revised Code states that an LLC organized in the state of Ohio is dissolved by the expiry of any period fixed in the articles of organization.

Dissolution by Will

If the members of an LLC decide that they no longer wish to continue with the business, they can terminate it by will. In this situation, they must pay off all company debts and finalize all outstanding transactions. For example, section 17353 of the California Corporations Code states that after payment of debts and liabilities, the company’s assets should be distributed among the members according to their rights and preferences.

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Dissolution by Death

Depending upon state laws and the terms of the operating agreement, some LLCs may automatically dissolve upon the death of any of the members. In this situation, the deceased member's estate is entitled to any share of the assets that he is owed. For any single member LLC, the company will dissolve upon the death of the member, unless the operating agreement states otherwise.


Each state holds a register of companies; therefore, it’s important to file a notification of dissolution with the secretary of state. Most states have a statutory form for notifying dissolution. For example, Georgia requires LLCs to file a certificate of termination and records the effective date of dissolution as the date when the document is received.

Effect of Dissolution

Once dissolved, an LLC may only finalize outstanding issues and may not carry on any other business. For example, according to Section 608.4431 of the Florida Statutes, a dissolved LLC continues in existence for certain purposes, including winding up its assets, disposing property and finalizing any outstanding court proceedings.

Tax Matters

When dissolving any business, the owners must make sure that they pay all outstanding taxes. The IRS requires all taxpayers to file an annual return for the year that they go out of business. Any LLC that employs staff should also file employment tax returns for all employees. Federal tax authorities will also require LLCs to pay all relevant taxes and file outstanding returns.

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Maryland's LLC Dissolution Law


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Illinois LLC Operating Agreement

Illinois state statutes 805 ILCS 180 Limited Liability Company Act Sec. 15-5 defines the operating agreement as the agreement concerning the relations among the members, managers, and limited liability company. Illinois statute permits, but does not require, the members of an Illinois limited liability company to enter into an operating agreement. If created, the operating agreement can generally contain any terms and conditions that do not conflict with the Illinois Limited Liability Company Act.

How to Divide an LLC

Even if you’ve only been in business a short time, dividing your limited liability company can be complicated, since there is no one-size-fits-all solution. An LLC is a hybrid type of business entity that mixes features of a corporation and a partnership, which makes it flexible. LLCs are formed under the authority of state law, and each state’s LLC law has its own provisions to govern breaking up an LLC. States even have different terms to describe this event – winding up, termination, cancellation or dissolution.

What Is an LLC Termination Date?

Forming a limited liability company, or LLC, creates a separate legal entity for your business. The primary reason to form an LLC is to shield you from the debts and liabilities incurred by the business. Your LLC will continue to exist until it is terminated according to the requirements of your state’s LLC laws. In some states, you can set the termination date at the time you form the LLC.

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