LLC Company Closure Guide Step-by-Step Dissolution Process in America
Closing an LLC (Limited Liability Company) in the United States can differ from state to state and situation to situation. However, in general, the steps to follow are similar. In this guide, we will cover in detail how you can close your LLC company in America. We will also cover the LLC dissolution processes specific to the state of California.
Types of Company Closure in the America
Before closing an LLC, it is important to know the types of dissolution and what each one means. In the United States, company dissolution proceedings are categorized under three main headings:
Judicial Dissolution
Judicial dissolution is a court-ordered dissolution of a company when the partners of the company have disagreements and cannot find a common path to business sustainability. When disputes between the partners cannot be resolved, one or more of the partners may apply to the court and request the dissolution of the company.
When to Apply?
- Partners disagree on business strategies or goals
- Breach of company contract
- Loss of trust between partners
Administrative Dissolution
Administrative dissolution is imposed by the state if the company fails to fulfill its legal obligations. This usually occurs as a result of the company’s failure to submit annual reports or pay required fees set by the state. In the case of administrative dissolution, the state can stop the company’s activities and revoke the legal status of the company.
Possible Causes
- Failure to submit annual reports
- Failure to fulfill tax obligations
- Failure to file legal documents on time
Voluntary Dissolution
Voluntary dissolution is when the owners of the company voluntarily close the company. This can occur by the owner’s decision in single-member LLCs or by unanimous or majority decision of the members in multi-member LLCs. Also, the occurrence of certain events specified in the company agreement (for example, the death of a partner) can also initiate the voluntary dissolution process.
Steps
- Members’ decision to dissolve
- Official documentation of the termination decision
- Initiation of necessary legal procedures
LLC Company Closing Process General Rules
Once you have decided to close your company, you need to follow the general steps below:
Preparation of Termination Documents
Just as you have prepared official documents when establishing your company, you need to go through a similar process when closing it down. You must submit Articles of Dissolution to the relevant authority of the state where your company is registered. Some states may also require a Certificate of Liquidation. Once these documents are approved, your company is technically dissolved. However, in some cases, this step alone may not be sufficient.
Things to Consider
- Filling in the documents completely and accurately
- Payment of required filing fees
- Adhering to the deadlines set by the state
Settlement with Creditors
Before you dissolve your company, you need to fulfill all your financial obligations. This includes paying or settling your debts by notifying your creditors and suppliers that you are closing the company. Some states require you to notify creditors before filing dissolution documents. While this is not mandatory in the state of Kentucky, it is recommended for business ethics.
What to do?
- Sending written notices to creditors
- Payment or restructuring of debts
- Closing accounts with suppliers and customers
Revocation of Licenses and Permits
If your company has obtained licenses or permits from state or local governments for its activities, these documents must be revoked. Otherwise, you may unnecessarily incur annual fees or renewal notices.
Steps
- Contacting relevant institutions
- Filling out cancellation forms
- Keeping approval documents
Control of Tax Liabilities
You should check and pay any tax liabilities incurred during the time your company has been in operation. This includes income taxes, sales taxes and other state or federal taxes. In particular, if you have collected sales taxes, you must remit these amounts to the government.
What to do
- Submission of tax returns
- Settlement of outstanding tax debts
- Clearance Certificate from tax offices
Cancellation of EIN Number
The Employer Identification Number (EIN) you received from the IRS for your company must be canceled after the company is closed. To do this, you must send a formal letter or form to the IRS requesting that your EIN be canceled. The IRS website has details about this process and the necessary contact information.
How to do it?
- Sending written notification to the IRS
- Attachment of documents showing that the company has been dissolved
- Retention of the approval letter
Closing your LLC company in America requires following certain procedures. By taking into account the specific rules of your state, following the general steps and preparing the necessary documents correctly, you can successfully complete the company dissolution process. Remember, fully fulfilling your legal obligations will prevent potential problems in the future.
Things to Consider When Closing a Company
- Timing: Timing company dissolutions to coincide with the end of the year or during the tax season may facilitate tax filing.
- Records Retention: It is advisable to keep all dissolution documents, confirmation letters and related documents for at least several years.
- Professional Advice: Getting support from legal and financial advisors will help you complete the process smoothly.
- Informing Employees: If you have employees, do not forget to give them formal notice of the company’s closure.
- Banking Transactions: Make sure all checks and payments are cleared before closing your company bank accounts.
