How to Dissolve an LLC

If you have a limited liability company (LLC), you may need to dissolve it at some point. For example, maybe you’re moving to another state, changing your business to a corporation, or even going out of business. 

Whatever the reason, there are steps to follow to dissolve your LLC correctly with the state. If you fail, you’ll still be responsible for filing annual reports and paying the associated fees. 

Read on to learn how to get it done the right way. 

The Process to Dissolve Your LLC

Shutting down an LLC requires several steps to avoid any future legal issues.    

1. Vote for Dissolution

LLC owners, known as members, must vote to dissolve the LLC. Hopefully, you have an operating agreement that details the process to do so. Once you do so, you’ll need to draft a resolution to dissolve the LLC, which you’ll keep in your records. 

2. Cancel Business Licenses and Permits

If you were required to get licenses and permits for your business, you’d need to contact the issuing agencies to cancel them so that you’re not charged renewal fees. Likewise, if you have any outstanding fees, you’ll likely need to pay them to cancel.

3. Notify Creditors

If you owe money to any creditors, you’ll need to notify them in writing of the dissolution and give them detailed instructions on filing any claims for the outstanding debt. This must be done before you formally dissolve your LLC with the state.  

4. Notify Tax Departments

Notify any relevant tax authorities of the dissolution and pay any outstanding taxes due.

5. Cancel Contracts and Settle Financial Obligations

If you have contracts with vendors, lessors, or any other outstanding financial obligations, you’ll need to ensure all your obligations are fulfilled and all contracts are canceled. 

6. Distribute Assets to Members

If the LLC has any assets remaining in any form after all financial obligations have been settled, they must be distributed to members based on LLC ownership percentages. If the assets are equipment, property, or other non-cash assets, they’ll need to be sold first so distributions can be made in cash. 

7. File the Dissolution Papers with the State

You’ll need to go to the relevant state website, usually the Secretary of State’s, to file dissolution papers. You’ll likely also need to submit verification that your tax obligations have been settled.

For detailed guidelines on how to dissolve an LLC in your state, please select your state from the list below to find the specific requirements.

In Closing

Regardless of the reason, LLC dissolution must be done right to avoid legal issues and financial penalties. Therefore, it’s highly recommended that you employ the services of an attorney to ensure everything is done correctly and all bases are covered.