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6 Easy Steps to Dissolve an LLC

6 Easy Steps to Dissolve an LLC

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Learning to dissolve an LLC can be beneficial if you are thinking of closing a business. It protects you from any liability in the future should anything happen. Despite the fact that it seems like it is an unnecessary hassle, it is actually easier to do than most people are aware of.

Why it’s worth dissolving an LLC

In a word: responsibility. Taking the right steps to dissolve an LLC is one way to ensure that you cover your legal basis. When you register an LLC, you file documents for both your local and federal government.

If you do not tell them that your LLC is no longer active, they may not know otherwise. That means they still expect fees and taxes every year. This is obviously not fantastic.

When you say goodbye to your LLC, you do not have to worry about fees and taxes accruing in the background. Although “dissolution” sounds a bit harsh, you will sometimes dissolve your LLC for reasons other than the company not working. But that’s a story for another day. Here’s what you need to start dissolving your LLC the right way.

The investment needed to dissolve an LLC

To dissolve your LLC, spend some time filling out paperwork and informing the right people. While this may sound like a big job, dissolving your LLC is not as involved as you might think, especially if you run a small business.

However, there are ways you can make things easier for yourself. For example, you will set aside money for all the fees involved and unexpected expenses that may come with the resolution. You will also want to invest time in learning the specific process for your state, as this will vary depending on where your business is registered.

Chances are, there are plenty of documents you need to share with stakeholders in your business. With a simple document management tool like Dropbox, you can make the process of saving and managing documents easier for yourself.

Once you sign up, you get access to plenty of file space to store digital copies of paperwork, statements, and record important dates. You can also organize your documents by file or by date and easily filter through your files.

6 Steps to Dissolve an LLC

Below we review the most important steps you need to take to dissolve your LLC properly. Have a cup of coffee and have a good time. Here’s everything you need to know.

# 1 – Get organized

While this may seem like an obvious thing to do, you may be tempted to jump into things without taking stock of what you need to do first. But with LLC procedures, it’s best if you take the time to make sure you cover all of your bases and know what you need to get started without overlooking anything critical.

What do we mean by this? First, take stock of what you need to assemble to ensure a clean dissolution process. For example, if your company was a one-person show, you do not have to worry about proper compensation of employees or officially announcing that you are dissolving the company.

However, if you were a major operation with employees, salaries, loans or even banking, you will take the step to dissolve your LLC as cleanly as possible. Consider making a list of everyone who will be involved in the process.

You also want to take full stock of your finances. Are there any outstanding debts to be paid? Do you have pending invoices that have not yet been paid? Are you able to cover employee salaries, if any, as you go through the dissolution process?

What about your online presence? Are there any sites that need to be removed? Any registered physical placements that need to be canceled with platforms like Google My Business? As you can see, the list goes on and on. Therefore, we recommend that you create a checklist with everything you need to do to ensure that you do not omit anything.

Then there is the issue of paperwork. Gather all the necessary paperwork needed to notify your state and local governments that your business is no longer operating. Using a tool like Dropbox, you can easily gather and organize all the paperwork you need for the process. You can also share documents with others via email. We will talk more about the paperwork below.

# 2 – Let stakeholders know

Unfortunately, you can not just submit dissolution documents and call it a day. You need to inform the key people involved in your business. These can be stakeholders such as:

Banks and business lenders Suppliers Any insurance you work with Partners and investors Agencies or companies you have active contracts with your State Secretary The State Tax Office

Notice to everyone that you have had significant business involvement in, in addition to state and federal authorities, will ensure a cleaner dissolution process without pending agreements remaining unresolved. It’s also a great way to stay in good standing with other devices you were previously involved with.

You will definitely want to notify your state and federal authorities with the correct dissolution articles. This way you are in good shape if you want to start another business in the same state.

# 3 – Pay any pending salaries and debts

If you have any outstanding debts, now is the time to pay them off. Similarly, if you have outstanding invoices, be sure to collect payments on time. Outstanding contracts must also be concluded.

Payment of salaries can be another necessary step in the dissolution process. It is important to be proactive about paying employees the last payslips they owe, as well as any additional compensation needed. When shutting things down, also remember to file your employee taxes correctly.

Employees must be provided with W-2s for their own tax duties. If you offered a benefit package to employees, you would like to contact your provider to settle your retirement accounts and health plans.

Do you rent a physical place? Do you need to calculate rent in relation to the rest of the month? Do you rent any equipment you need to return and log on to?

Throughout the process, it is important to remember to record all the paperwork you process to further protect yourself from any liability issues that may arise.

# 4 – Distribute any remaining assets

At this point, you have paid off your remaining salaries and debts, and you have collected all the payments you owe. Now you can decide what happens to everything left over. If you are the sole owner, this is easy – everything goes to you.

If there are a number of business owners for your LLC, take the time to figure out how you want to distribute what is left, whether it is commercial property or capital. One of the best ways to decide how assets should be distributed? Leave it to a vote. It is one of the best ways to ensure justice and to ensure that everyone is heard throughout the process and preferences are respected properly.

This is also a good time to involve your accountant in keeping records and numbers accurate. Why? There are things like these that you need to report on tax time.

# 5 – Fill in correctly and archive your dissolution articles

It is necessary to complete dissolution documents and submit them to your Secretary of State’s office to handle the process. Although this essential step is listed as the fifth step, it can be either the first thing you do or one of the last. The important thing is that you do it and you record everything afterwards.

For example, if you live in California, you must file the appropriate paperwork with the California Secretary of State. You must also file your final tax return with The California Franchise Tax Board. To find the dissolution forms, navigate to the Foreign Minister’s website, where you can download the relevant forms.

Once completed, you can either enter your set of forms or submit them. Some states can even do things electronically. Either way, it’s best if you do your own research to see what the current state guidelines are where your business is registered.

The exact forms you need to file depend on how the business members voted to dissolve. Whether the dissolution vote was unanimous or not determines the right forms for your business. Along with that, there are dissolution fees to think about.

Continuing with the example in California, it actually charges no dissolution fees. But that can change from state to state. You can expect the filing process to take anywhere from three to four weeks. You must also remember to withdraw all DBAs you traded with so that the state can have an accurate record of it.

Keep in mind that the dissolution submission process may vary from state to state. So it is best to ensure what requirements are necessary for your state. It can be as easy as doing a quick Google search with the keywords “LLC Resolution Forms” and the name of your state. Usually, your official state websites end up in a .gov extension.

In California, if you do not dissolve your LLC, you are still liable for the $ 800 annual LLC fee, and you risk losing the ability to do business in the state. This is another reason to follow up with dissolution until it is officially completed.

Once your Secretary of State accepts and files your papers, you have completed the most necessary step in the process. However, you will end up taking stock of all your paperwork. This takes us to the next and final step.

# 6 – Keep track of your paperwork

By this time, you should be almost done with the solution. Your stakeholders were notified, debts were paid, dissolution articles were filed, and you have good status with everyone involved.

For safety’s sake, it is always wise to keep accurate records of all your paperwork. If you cannot keep originals, be sure to make copies and save them. You can avoid clutter by maintaining a digital archive account with a tool like Dropbox. It can be as easy as opening a file, giving it a name and a date and saving all your documents there for storage.

This may seem like an unnecessary extra step. However, if you ever find yourself in a situation where you have to show proof of any legal documents or remember important dates, you can have peace of mind by having stored all your data correctly.

Next step

While a proper dissolution of your LLC can be an involved process depending on the size of your business, it is a step in closing the business that cannot be overlooked. It will protect you from potential liability now and in the future. It will also ensure that you can legally do business again in your home state. Hopefully, this guide sheds some light on the important steps needed to properly dissolve your business unit.

However, there is one important thing to remember: This should not be confused with legal business advice. You should consult with your solicitor to complete all procedures or if you have any questions regarding the specifics of your business.
If you liked this guide, check out our other in-depth resources to learn more. Our guide on how to build a brand can help you with your next business. Or maybe you want a guide that fills you in on the best interview questions if you ever need to hire employees again. If nothing else, we recommend that you check out our guide to independent contractors.

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