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.

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.

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.

Ready to start your LLC? Start an LLC Online Now

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
How Does a Limited Liability Company Work?

References

Related articles

S Corporation Structure

An S corporation is a tax designation that a business must apply for with the Internal Revenue Service. Used for small businesses, the benefit of the S corporate designation is that it allows the business to be taxed as a partnership. To apply for S corporate status, the business must submit a completed Form 2553 within 2 months and 15 days after the beginning of the first tax year that it wants to be treated as an S corporation.

What's an LLC?

An LLC, or limited liability company, is a flexible form of business entity that provides its owners with the safeguard of limited liability. An LLC can have any number of owners, known as members, so the entity is suitable for both sole proprietors and larger businesses. Although each state has its own laws for LLCs that are registered within its jurisdiction, the general rules regarding formation, limited liability, taxation and operation of the LLC are broadly similar.

Advantages & Disadvantages of a Limited Liability Company

A limited liability company, or LLC, is an entity that offers both advantages and disadvantages to a business owner. The advantages can range from liability protection to tax benefits, while drawbacks may include lack of uniformity and consistency among the state statutes governing LLCs. A savvy business owner should consider all these advantages and disadvantages before deciding whether a limited liability company is the preferred structure for her enterprise.

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 ...

What Financial Liability Does Each Member of an LLC Accrue?

Limited liability companies play a valuable role in today's business world and are a common alternative to ...

LLC Explained

A limited liability company (LLC) is a type of company that exhibits characteristics of both partnerships and ...

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 ...

Browse by category
Ready to Begin? GET STARTED