How Long Does an LLC Last?

If you’re considering forming a limited liability company (LLC), you may wonder how long the company will last. Hopefully, it will be a massive success and live on forever. 

The same holds for its legal existence: if you follow state and local regulations and conduct your business correctly, your LLC will last indefinitely. But in some instances, it might need to be dissolved, so read on to learn everything you need to know about the lifetime of LLCs last and what can lead to their dissolution. 

The Articles of Organization

When you file your articles of organization, sometimes called a certificate of organization or a certificate of formation, with your state, you’ll specify whether you want your LLC to last in perpetuity or to end on a particular date. 

You might choose the latter if you’re starting a temporary business or forming an LLC for some specific event or period. 

LLC Dissolution

If you specify in your LLC formation forms that you want it to last in perpetuity, the only way the LLC can end is by dissolution. You may, at some point, voluntarily dissolve your LLC if you go out of business, retire, or want to have a corporation instead. 

An LLC can also be dissolved by court order. This could occur if member disputes arise, the LLC can’t pay its debts, or the LLC is involved in illegal activity or fraud. The state could also dissolve your LLC if you fail to file annual reports and pay yearly fees. 

How to Dissolve an LLC

If for some reason, you want to dissolve your LLC, it will involve several steps to do it correctly.

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 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 dissolve your LLC with the state.  

4. Notify Tax Departments

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

5. Cancel Contracts and Settle Financial Obligations

If you have contracts with vendors, lessors, or any outstanding debt, you’ll need to ensure all your financial 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 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. 

Domestication

To avoid dissolution, one option is to domesticate your LLC. Domestication is the process by which an LLC changes the state in which it is registered. Once domestication is complete, the laws of the original state no longer apply, and the new state laws apply instead. 

This provides several benefits:

• No need for dissolution
• No interruption in business
• Continue using the same bank accounts
• Continue using the same EIN

Each state has its domestication process, and the laws of both states must be followed. In general, domestication occurs as follows:

1. Draft a plan. Have your attorney outline the steps of domestication.
2. Have LLC members vote and approve the plan of conversion.
3. Complete documents required by both states.
4. File the conversion forms and pay the required fees.
5. Complete documents required by the new state to form the domesticated LLC.

Domestication can be complicated because the laws between states may conflict. There also may be tax considerations at the state level, such as unpaid franchise taxes that become due.

In Closing

Hopefully, your business will be successful, and your LLC will continue to provide for your children’s children and beyond. But if you ever need to dissolve your LLC, follow all the proper steps to avoid future issues. 

It’s often a good idea to involve an attorney to ensure everything is handled correctly. Otherwise, you could face an interruption to your business.