How to Dissolve an LLC: Key Steps and What You Need To Know

Dissolving an LLC can be a difficult decision, but in many cases, it’s the best path forward. Understanding the process ensures a smooth transition, whether you’re closing your business permanently or simplifying operations.

This guide explains how to dissolve an LLC, covering the general requirements, state-specific steps, and common pitfalls to avoid. We’ll also show how Filejet’s Entity Management Software can streamline the process, making dissolution as seamless as possible.

Main Takeaways From This Article:

• Dissolving an LLC involves reviewing the operating agreement, filing appropriate paperwork, settling debts, closing accounts, and maintaining records.
• State-specific requirements vary significantly, so it’s essential to understand the rules in your jurisdiction.
• Common pitfalls include failing to notify tax authorities, forgetting to cancel licenses, and not properly closing bank accounts.
• Filejet’s Entity Management software supports the dissolution process by tracking compliance and storing key documentation.

How To Dissolve an LLC (Limited Liability Company): A Step-by-Step Guide

Following specific legal and administrative procedures for dissolving an LLC is necessary to ensure compliance and avoid future liabilities. Here are the key steps:

1. Review the LLC Operating Agreement

Before you proceed with dissolving an LLC, check the terms of the operating agreement. This is the governing document for your LLC, and this is where you will find details about how to dissolve it properly. Specifically, it will list procedures for dissolving, including specific conditions or required votes.

2. File Articles of Dissolution With the State

The next step is to formally notify the state by filing the Articles of Dissolution. This documented request to dissolve your LLC must be submitted to the Secretary of State or equivalent authority in the state where the LLC was formed. 

The requirements for this document can vary, so it’s crucial to check the specific filing requirements, fees, and forms required by your state.

3. Notify Creditors and Settle Outstanding Debts

It’s essential to inform your creditors about your decision to dissolve the LLC. You must notify all known creditors and provide them with an opportunity to file claims. 

This proactive communication allows you to settle pending debts and financial obligations, which is critical for protecting your personal assets from liability after dissolution. Take the time to negotiate and pay off any outstanding debts.

4. Close Your Business Bank Account

Once all obligations are settled and the dissolution paperwork is filed, close the 5. Cancel Business Licenses, Permits, and DBAs

To legally dissolve your LLC, you must cancel all business licenses, permits, and “Doing Business As” (DBA) names registered with the state and local agencies.

This voluntary cancellation helps prevent any future liabilities or fees and clears any regulatory requirements from your business officially.

6. File Final Tax Returns

File any required federal, state, and local tax returns, including payroll taxes, if you have employees. Report any final sales or income to comply with tax obligations. Failure to settle tax liabilities can lead to future complications and penalties.

7. Maintain Business Records Post-Dissolution

Even after the LLC is officially dissolved, it is crucial to maintain copies of all business records for a specified period (typically several years), which include tax returns, correspondence with creditors, and any documents related to the dissolution process. 

This documentation serves as vital evidence should any disputes arise later or if proof of the business’s compliance is necessary. If you’re unsure about how long you should hold on to these records, consult with a legal professional who can determine the appropriate retention period for your specific situation.

State-Specific LLC Dissolution Processes

Dissolution processes vary by state, which means business owners should familiarize themselves with the rules of the states they operate in. Here are the dissolution processes for five key states where businesses operate:

Florida Limited Liability Company Dissolution

In Florida, dissolving an LLC involves the following steps:

1. Review the Operating Agreement: Ensure compliance with any provisions related to dissolution.
2. Gather Required Information: Collect all necessary details needed to complete the dissolution form.
3. File Articles of Dissolution: Submit the Articles of Dissolution online with the Florida Division of Corporations. You can also print the form and mail it with a check or money order if not filing online.
4. Settle LLC’s Debts: Notify creditors and settle any outstanding financial debts.
5. Cancel Licenses and Permits: Remove any business licenses or permits tied to the LLC.
6. File Final Tax Returns: Complete and submit any required federal and state tax returns.
7. Pay the Required Fees: To dissolve an LLC, a $25 filing fee is required. Optional fees include $5 for a Certificate of Status, confirming the LLC’s inactive status, and $30 for a certified copy of the Articles of Dissolution, which verifies the dissolution.
8. Submit and Download the Confirmation: Allow two to three business days for the dissolution to be posted on Sunbiz. Once processed, download a copy of the Articles of Dissolution from Sunbiz for free.

Texas Dissolution Requirements

To dissolve an LLC in Texas, follow these steps:

1. Check Operating Agreement: Review to ensure compliance with any dissolution provisions.
2. Obtain Approval from Members: Get documented approval from all LLC members. Approval can be secured through a majority vote or by following dissolution provisions laid out in the company agreement.
3. File Certificate of Termination: Submit a Certificate of Termination to the Texas Secretary of State.
4. Obtain Tax Clearance: Pay all taxes and acquire a tax clearance letter from the Texas Comptroller’s office.
5. Settle Outstanding Debts: Notify creditors and pay off any debts.
6. Notify Creditors: Inform claimants and creditors of your decision to dissolve the company and allow them to collect unpaid amounts.
7. Cancel Licenses and Permits: Ensure all licenses and permits associated with the LLC are canceled, and close LLC bank accounts.
8. Liquidate Assets and Distribute Funds: Distribute remaining assets among LLC members per ownership rights. Creditors must be paid before distributing leftover funds.
9. Handle Out-of-State Registrations (if applicable): If registered in other states, file termination paperwork in those states. Certificate of Termination of Existence, Termination of Registration, Application for Withdrawal, and Certificate of Surrender of Right to Conduct Business will be required.
10. File a Certificate of Termination with the Texas Secretary of State: Attach a tax clearance certificate and include the LLC name, Secretary of State file number, a description of the dissolution approval process, a statement of compliance with the Texas Business Organizations Code, the effective date, and authorized signatures. The filing fee is $40.

Delaware Dissolution Requirements

If your LLC is in Delaware, follow these steps for its dissolution:

1. Review LLC Agreement: Confirm procedures for dissolution as outlined in the LLC operating agreement. If the agreement is silent, the Delaware LLC Act applies. A two-thirds (66.67%) majority of members must agree to dissolve (not applicable for single-member LLCs). In the absence of voluntary dissolution, a member can seek judicial dissolution through the courts.
2. File Certificate of Cancellation: Submit a Certificate of Cancellation to the Delaware Division of Corporations and pay a $200 fee. You can submit the certificate by mail with a cover letter and payment or online through the Delaware Division of Corporations website (recommended).
3. Clear Franchise Taxes: Ensure all outstanding Delaware franchise taxes are paid. File final federal and state tax returns with the IRS and Delaware Division of Revenue. 
4. Settle Debts: Notify creditors and pay them any outstanding amounts to settle all debts.
5. Cancel Business Registrations: Cancel any business licenses or permits held by the LLC.
6. Cancel the EIN (Employer Identification Number): If the LLC had payroll, ensure employment returns are marked “final,” and cancel the EIN with the IRS to prevent fraud. 
7. Distribute Remaining Assets: Distribute the remaining assets of a Delaware LLC in the following order: first to creditors, then to members according to the operating agreement, next for initial contributions, and finally based on ownership percentages.

New York Dissolution Requirements

In New York, the dissolution process consists of the following steps:

1. Consult the Operating Agreement: Check for specific dissolution procedures in the agreement. Typically, LLC members must vote to dissolve the company.
2. File Articles of Dissolution: File these documents with the Department of State within 90 days of the decision. This requires the LLC’s name, business address, formation date, reason for dissolution, and a $60 fee. A Form DOS-1381 also needs to be sent to the New York Secretary of State. 
3. Put Creditors on Notice: Notify creditors about the business’s dissolution by directly emailing them or publishing a notice in a local newspaper for unknown creditors.
4. Settle Financial Obligations: Pay off all debts and taxes, including debts owed to LLC members. Distribute remaining assets according to New York law or the LLC’s operating agreement.
5. Cancel Business Licenses & Bank Accounts: Remove any business licenses and permits associated with the LLC, close LLC bank accounts, and settle any remaining contracts.
6. Complete Final Tax Filing: Make sure that all applicable final tax returns are filed and paid with the state tax department. Get tax clearance from the New York State Department of Taxation & Finance.

California Dissolution Requirements

For California LLCs, the dissolution process includes these steps:

1. Read the Operating Agreement: Refer to the LLC operating agreement to verify the required steps for dissolution as per the agreement. Typically, LLC members must vote to dissolve the company.
2. File Certificate of Dissolution: If the dissolution vote was not unanimous, submit both the Certificate of Dissolution (Form LLC-3) and the Certificate of Cancellation (Form LLC-4/8). If the vote was unanimous, only the Certificate of Cancellation is required. These forms can be filed online or by mail.
3. Notify Creditors: Send written notice to all known creditors, and Consider publishing a dissolution notice in a local newspaper to protect against future liability.
4. Settle Debts and Distribute Assets: Pay off all debts and liabilities. Distribute remaining assets to LLC members. First, return members’ capital contributions, and then, make final distributions based on ownership percentages.
5. Pay Outstanding Taxes: Ensure all final tax returns (including the Franchise Tax Board (FTB) filings) are completed. Make sure all California taxes owed by the LLC are settled.
6. Cancel Licenses and Permits: Officially cancel any business licenses or permits associated with the LLC. If your LLC is registered in other states, file termination documents there. Close LLC bank accounts and settle contractual obligations.

Pitfalls to Avoid When Dissolving an LLC

The dissolution of an LLC can be complex. Being aware of common mistakes can help prevent issues during the process. These include: 

• Failing to File Proper Paperwork: If you fail to file the necessary papers, you could face ongoing liability, administrative dissolution, or legal issues. You should carefully look at your state’s requirements and make sure you’ve met all of them. 
• Ignoring State-Specific Rules: Each state has its requirements, and overlooking any can delay or complicate the process. Always refer to the latest guidelines on your state’s official website to remain compliant.
• Not Notifying the IRS or State Tax Authorities: Ignoring tax obligations can lead to complications long after the LLC is dissolved. Make sure to formally notify the Internal Revenue Service (IRS) of the dissolution and handle any tax returns to avoid penalties.
• Forgetting to Cancel Licenses and Permits: Within 30 days of dissolution, you must cancel your business licenses and permits. If you fail to cancel these after your business closes, you could still be liable for unexpected fees or renewals.
• Not Closing Business Bank Accounts Properly: Leave no loose ends untied. Ensure that all business accounts are officially closed so there is no chance of unauthorized usage and future fees.

What Happens After You Dissolve an LLC? 

Once your LLC is dissolved, you have to take certain steps to ensure complete compliance and closure. The first thing you need to do is file the final income tax return. Make sure it’s clear that it’s the final return for the business. If your LLC has one or more employees, make sure you file the final employment tax return as well. 

If your LLC was registered to do business in several states, you’ll need to file the necessary paperwork with each state to formally cancel or withdraw the right to conduct business there. These steps will put an end to your liability for annual fees and business taxes or the need to file annual reports.

How Filejet Simplifies the LLC Dissolution Process

Dissolving an LLC can be a complex and time-consuming process, but using the right technology can ease the administrative burden. Filejet’s Entity Management Software offers a centralized platform for managing filings and ensuring compliance.

Automates Business Entity Dissolution Filings

Filejet simplifies the dissolution process by providing compliance tracking, centralized document storage, and expert support to ensure filings are completed correctly. By leveraging the platform’s compliance tools, businesses can reduce the risk of missed deadlines and ensure accurate filings, minimizing administrative tasks during dissolution. 

Tracks Compliance Deadlines

Managing compliance deadlines can be challenging, especially during the dissolution process. Filejet’s compliance tracking tools help businesses stay informed of important filing deadlines and reduce the risk of penalties while ensuring regulatory requirements are duly met. 

Ensures Documentation Is Properly Stored

Having all documentation properly stored in one place eliminates the hassle of searching through files or managing physical paperwork. This feature allows for quick access to important documents when needed, making it easier to reference past actions or provide necessary information for audits. 

Provides a Digital Registered Agent Service

Filejet offers a digital registered agent service that handles official correspondence on your behalf. This includes receiving and managing legal documents, state notifications, and other important communications that pertain to your LLC’s dissolution. This feature simplifies the dissolution process by ensuring that all correspondence is handled efficiently.

Enjoy a Seamless, Hassle-Free Dissolution Process With Filejet

When it comes to dissolving an LLC, the process doesn’t have to be stressful. 

With Filejet, you can have a hassle-free dissolution experience that minimizes administrative burden and keeps you organized throughout the entire process.

Here’s how you can benefit from using Filejet for your LLC dissolution:

• User-Friendly Interface: Easily navigate the intuitive platform to manage entity compliance and access important documents.
• Tracks Compliance Deadlines: Stay on top of key filing deadlines with Filejet’s compliance tracking tools, helping you avoid penalties and missed obligations.
• Comprehensive Support: Get assistance from our knowledgeable support team for compliance-related questions and guidance on how best to use the platform for filings.
• Centralized Management: Use a secure, cloud-hosted platform to track, store, and manage entity compliance documents in one place.

Don’t let the complexities of LLC dissolution overwhelm you. Take the first step toward a hassle-free dissolution process with Filejet!

Book a Demo Today

FAQs

Can You Dissolve an LLC Yourself?

Yes, you can dissolve an LLC yourself. However, given the complexities and state-specific requirements, working with a professional or using an entity management software solution like Filejet can be beneficial.

Do I Need to Notify the IRS If I Close My LLC?

Yes, you need to notify the IRS by filing your final tax returns and indicating that the business has been terminated.

What Is the Difference Between Dissolving and Terminating an LLC?

Dissolving an LLC is the legal process of ending its existence. Terminating often refers to the cessation of business operations, but the legal entity may still exist until formally dissolved.

How Much Does It Cost to Dissolve an LLC?

The cost varies by state and depends on filing fees, professional fees (if applicable), and other related expenses. Contact your state’s Secretary of State office for specific fee information.business bank account associated with the LLC. This step is crucial to prevent any unauthorized transactions or fees that could add complications post-dissolution.