How to Dissolve an LLC
Here are a few of the important steps to dissolve an LLC:
- Check the Operating Agreement. Most Operating Agreements will describe the process that needs to be taken to dissolve the LLC. The Operating Agreement will how, when, and the process by which the LLC can be dissolved.
- Check Your State’s Statutes. If the Operating Agreement does not cover dissolution, or if your LLC does not have an Operating Agreement, then your state’s statutes will describe the requirements for dissolution. It is important to check the state requirements even if you do have an Operating Agreement, as well.
- Document the Members’ Consent. Many states and Operating Agreements will require a unanimous or majority vote or consent of the Members to the LLC dissolution. It is important that the vote or consent be documented in writing. Call a meeting of the Members, or draft a resolution or consent to action in lieu of a meeting, to evidence that the LLC has met those requirements. Even in a single-member LLC, you should have some written documentation showing that you, as the sole Member, have decided to dissolve the LLC.
- Pay Off Debt. If the LLC has any outstanding debts, pay those off if possible. Most states will require that creditors be paid off before the Members can take any final distribution of the LLC assets.
- Distribute the LLC’s Assets. After the LLCs debts have been paid, the Members can take a final distribution of the LLC assets. Typically the final distribution will be proportionate to each Member’s respective ownership in the LLC, but it is important to check your Operating Agreement and state laws as they may have a different requirement.
- File Dissolution Paperwork with the State. Complete and file the Articles of Dissolution or other dissolution form(s) with the Secretary of State. This will officially dissolve the LLC with the state.
- File the Final Tax Return. When tax time comes around, file the final tax return with the IRS and state. In many cases you can indicate that this will be the final tax return for the entity.
The steps to dissolve an LLC are going to vary depending on your company, your Operating Agreement, and your state. It is a good idea to consult your attorney and tax professional to ensure that you are taking all the proper steps to dissolve your LLC.