After create an LLC in the United States, it is normal for you to start a great business career, either marketing goods or offering services, alone or with a team.
However, it can happen, due to external or internal factors, that your business has not worked or that the relationship with your partners has not been successful. In these cases, it is best to dissolve the LLC and move on.
If this is your situation, below is a complete guide on how to dissolve a limited liability company in just nine steps. Let's get started!
1. Review your Operating Agreement
The first thing you should do to dissolve an LLC is review very well the Operating Agreement of the organization, that document in which there will be detailed information about the functions and responsibilities of the business and each partner.
Usually, this report explains what the dissolution process is like, which normally begins with the vote of the members. members who have to give a majority decision.
In any case, in some states such as Florida, a voluntary dissolution is accepted through the individual and written consent of each partneras an alternative to voting.
2. Check State Regulations on LLC Closing
Next, you should check the state regulations on closing the LLC, since each state has its own conditions on how to dissolve a company and under what context to do it.
While the procedure is usually fairly standard throughout the United States, there may be exceptions, so it never hurts to contact the corresponding state office to ask all relevant questions.
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3. Sign a document between the members about the willingness to close the LLC
The third step to dissolve an LLC is to obtain a document that contains the signature of all members of the organization indicating their willingness to accept the closure.
The letter must be properly notarized and must explain from when the limited liability company will be officially dissolved to avoid possible legal inconveniences.
4. Pay off all debts before making the final distribution of LLC income
When all the partners of the company already agree with the dissolution, what needs to be done is settle all outstanding debts that the LLC may have before distributing the remaining income.
It is important to keep in mind that, if one of the members made a loan to the LLC, they will have less priority than the banks, tax collecting entities or the employees themselves.
5. Pay outstanding federal and state taxes
After paying off the debts, it is essential to pay the federal and state taxes that the LLC has pending before moving forward with the complete dissolution.
At this point, although the ideal is to contact a licensed accountant specialized, the truth is that you have to review the online platform of the IRS and the corresponding state agency and corroborate the amount to be paid, if there is any.
6. Distribute assets and income
The sixth step in the process to dissolve an LLC is to appropriately distribute the assets and income of the LLC according to the percentage of participation of each member.
For example, if there are two partners and each one has 50% of the company, then the assets and income will be divided in half. Each owner must get his or her share of the business, not a dollar more, not a dollar less.
7. Process the dissolution of the LLC
Next, you must process the dissolution of the LLC, that is, complete a form that provides the following information:
- Name of the company.
- Date of dissolution.
- Act that produced the closure (vote or consent).
- Obligations, responsibilities and debts.
- Declaration of asset distribution.
- Document indicating that there are no legal actions in process.
8. Make your last tax return to the IRS
Another step to dissolve the LLC is to file a final tax return with the IRS, indicating that there will be no more returns in the future.
It is essential to make this clarification, since this way the organization will be able to close the minutes of your LLC and will not be obliged to request your declaration in subsequent years.
9. Keep records for four years
Once the LLC is dissolved, members must keep all records related to the operation and the company for four years.
While the IRS can conduct audits up to three years, payroll studies can be done four years after closing.
Frequently asked questions
How long does it take for an LLC to dissolve?
Completely closing a limited liability company in the United States is a process that typically takes between two and fourteen business days. In some specific cases, the procedure may take longer.
How much does it cost to dissolve an LLC?
Usually, dissolving an LLC costs between USD 400 and USD 1,000. The final amount varies depending on state rates and the number of forms necessary to terminate the company in tax terms.
What happens if I regret dissolving an LLC?
If you regret dissolving your LLC, you can revoke the closing operation within a certain subsequent period that will depend on each state. After that time, you have to submit a reinstatement request.
Written by
Ignacio Navarro
Ignacio Navarro is a Certified Public Accountant, graduated in 2020 from the National University of Tucumán. Founder of Start Companies since 2023, he advises clients worldwide on forming LLCs in the United States and on proper tax filing. His expertise combines legal, tax, and practical knowledge, offering a comprehensive service that spans from company formation to bank account setup and sales platform integration.
