How to Stop My LLC

By David Carnes

The limited liability company is a popular business form because it offers owners the limited liability of a corporation without the burden of many of the formalities that corporations must adhere to. If you close an LLC, however, you must follow certain procedures mandated by state law.

Voting to DIssolve

The first step in dissolving an LLC is to authorize dissolution by a vote of LLC members. If your LLC has an operating agreement, it should specify dissolution procedures. These procedures may be limited by state law, however. California, for example, requires a vote of members who collectively own at least a simple majority of the interest in the LLC, but the state allows an LLC operating agreement to require a higher percentage. A dissolution vote will not be necessary if the LLC is being dissolved because its Articles of Organization specified that that it was to automatically dissolve on a particular date or upon the occurrence of a specified event.

The DIssolution Resolution

After voting to dissolve the LLC, draft a written resolution stating that dissolution of the LLC has been authorized, have every member who voted in favor of the resolution sign it, and distribute a copy to each LLC member. This may help prevent litigation in the future if a dissenting member claims that dissolution was not properly authorized.

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Preparing Articles of Dissolution

Articles of Dissolution are typically one-page, fill-in-the-blank documents that can be downloaded from the website of the secretary of state of the state that formed the LLC. A typical Articles of Dissolution form requires the name of the LLC, the date of its formation and the grounds for its dissolution -- such as the passage of a dissolution resolution or the occurrence of an event specified in the Articles of Organization. It must be signed and dated by a representative of the LLC. You may have to prepare similar documents for other states that have authorized the LLC to do business there.

Filing Articles of Dissolution

After preparing Articles of Dissolution, you must file them with the Secretary of State of the state that formed the LLC, and file similar documents in states that authorized the LLC to do business there. Some states allow online filing, while others require surface mail or hand delivery. Most states assess a small filing fee and will mail an official acknowledgment of the dissolution to an LLC representative.

Housekeeping Matters

Cancel all licenses and permits issued in the LLC's name and close the LLC bank account. This may require you to present the official acknowledgement of dissolution provided by the state. If you registered a fictitious business name for the LLC, you must cancel it. If the LLC obtained an Employer Identification Number, write to the Internal Revenue Service, Cincinnati, Ohio 4599 and inform the agency that you wish to close your business account because your LLC has been dissolved. The LLC must also file final tax returns with state and federal authorities, and pay any taxes due.

Distribution of Assets

All LLC creditors, including LLC employees, must be paid in full before any LLC assets are distributed to members. If any assets remain after creditors have been paid, the LLC must distribute them in the manner specified in the operating agreement. If no operating agreement exists or if the operating agreement is silent on this issue, you must refer to state default rules. Some states require the assets of a dissolving LLC to be distributed equally among the members unless an operating agreement states otherwise.

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Maryland's LLC Dissolution Law



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