In this guide, I talk about how to dissolve an LLC. Dissolving an LLC is a process that is usually done when the business will no longer be in operation. This can happen for many reasons, such as ceasing to trade or ceasing to do business in the state of formation.
It might also happen if the partners decide to break up their enterprise. Or, it may be because one of the partners has died and the other partners decide not to keep the LLC going, or other circumstances make it necessary for the LLC to dissolve.
You may be starting a business and you realize that being a business owner just isn’t for you or maybe you started a business with some partners and you realize that your partners are just a couple of turd bags whatever the reason behind it.
Process of dissolving an LLC
There are a few steps that you need to take to dissolve an LLC:
First things first as with most things having to do with your LLC check your operating agreement.
Your operating agreement might describe how when or the process by which the LLC can be dissolved.
If you don’t have an operating agreement or if your operating agreement is silent on the issue then you want to check the statutes in your state because every state is going to have a statute that describes how to dissolve an LLC.
There are for doing so California for example requires that all of the members consent to the dissolution so in California if you have an LLC with multiple members all of the members are going to have to consent to it if you all want to voluntarily dissolve an LLC and then depending on the requirements of your operating agreement or your state’s laws you’re most likely going to need to have some kind of a vote or some kind of written documentation that all of the members have consented to this even if you’re the only member you as the one member have to consent to dissolve an LLC and you want some sort of written documentation.
Once everybody agrees on it then you want to start paying off any debts of the company if there are outstanding debts creditors that still need to be paid off those need to be paid before you make any final distributions to the members you’re also going to want to check your operating agreement and/or your state statutes because there might be some sort of priority of who gets paid off.
If one of the members made a loan to the LLC typically a member who is a creditor is going to be paid off after other creditors that priority to pay off a member who made a loan to the LLC is going to be lower than then the priority of paying off a bank if your LLC doesn’t have any debts there are no creditors then at that point what’s that’s all taken care of you can make the final distribution.
For example, there are two members and there’s $5,000 left in the LLC all of the company’s assets are $5,000 in the bank, and you each own 50-50 of the company then that final distribution is going to be twenty-five hundred to one twenty-five hundred to the other.
Then you need to file the dissolution paperwork with your state in California this is called a statement of dissolution other states might call it something else but every state is going to have some paper that you need to file to dissolve the LLC officially with the state.
In the last, you need to wrap up the LLC’s taxes just because the LLC is dissolved doesn’t mean you get out of paying taxes for that last year so you need to whenever your tax time comes up whether it’s in April or you have a different tax year you file that final tax return pay whatever taxes you owe to the IRS and whomever else and then on that tax return, you can indicate that this is going to be the final tax return of the company.
The process of dissolving the LLC for some situations might be more complex so because of that it’s always good to work with an attorney when you’re trying to dissolve an LLC a special if there are multiple partners if you’re a single-member LLC you’re the only owner the process is a bit easier and it’s really easy if you don’t have any debt.
In this guide, I am telling you how to dissolve an LLC. With the help of this guide, you easily dissolve your LLC but checking with an attorney who’s licensed in your state to assist with the dissolution is going to be a good idea.