Fill and Sign the Uslegal Pamphlet on Dissolving an Llc Form

© 2016 - U.S. Legal Forms, Inc USLegal Pamphlet on Dissolving an LLC I NTRODUCTION Dissolution is the termination of a corporation, either a. voluntarily by resolution, paying debts, distributing assets and filing dissolution documents with the Secretary of State; or b. by state suspension for not paying corporate taxes or some other action of the government. An administrative dissolution occurs where the secretary of state (or some other state entity in charge of overseeing LLCs) orders a company to be dissolved because it has failed to comply with the state’s mandatory filing and reporting requirements, or is somehow otherwise delinquent under state law requirements (the most common example would be where the company is delinquent with its taxes). c. by judicial dissolution. There are six primary steps involved when dissolving a company. They are: •Corporate action to approve the dissolution •Filing articles of dissolution with the state •Filing all necessary federal, state, and local tax forms •Statutory notification to creditors •Settling creditors' claims •Distribution of remaining business assets When a voluntary proceeding for winding up has commenced, the corporation shall cease to carry on business except to the extent necessary for the beneficial winding up thereof and except during such period as the board may deem necessary to preserve the corporation's goodwill or going-concern value pending a sale of its business or assets, or both, in whole or in part. The board shall cause written notice of the commencement of the proceeding for voluntary winding up to be given by mail to all shareholders (except no notice need be given to the shareholders who voted in favor of winding up and dissolving the corporation) and to all known creditors and claimants whose addresses appear on the records of the corporation. The corporation has a duty to pay claims of creditors of the corporation out of assets of the corporation in the winding up process. P RELIMINARY S TEPS FOR D ISSOLUTION Examine the company’s assets. If you have partners, meet with them and list everything your company owns. The amount of debt your company has will determine how much cash the owners will walk away with. Make a list of all real estate, owned office furniture, computer equipment, bank account balances, stocks, bonds---anything of cash value. Make another list of all of your debts. Propose a formal dissolution. As an owner, you must write a formal request to have your company dissolved. This is often referred to as a "Formal Corporate Action." This written statement will set forth the agreement of all interested parties, such as board of directors and owners of your company, that the company will be dissolved. You may be required to file it with your state. V OLUNTARY D ISSOLUTION There are various reasons for deciding to dissolve an LLC. There may be internal discord, the purposes of the business may have been fulfilled, the business is failing due to unprofitability, members seek new pursuits, or other reasons. A dissolution plan may be drafted, covering the manner in which business operations of the LLC shall be ceased, the assets sold, the creditors paid, and what shall happen to any funds remaining. If the LLC is insolvent (meaning its assets are less than its liabilities), then the plan should address allocation of the LLC assets among the creditors. It may be beneficial to pay all government taxing authorities prior to private creditors if possible. The plan must be adopted by the LLC members. After adoption of the plan, the next step is the actual winding up of the affairs of the business. Creditors of the LLC must be notified that a plan of dissolution has been adopted. After the business affairs of the LLC have been wound up, the LLC must obtain a tax clearance letter from the appropriate state taxing authority. Once acquired the tax clearance letter is filed with the certificate (or notice) of dissolution with the Secretary of State's office. In order to formally end a corporation or LLC, an officer, director or member of the company must file a "Certificate of Dissolution" or "Certificate of Cancellation" with the appropriate state agency(s), after getting shareholder or member approval. Specific requirements vary by state, so local laws should be consulted. J UDICIAL D ISSOLUTION If there is disagreement on terminating the business, it may be necessary to petition the court to dissolve the company. Judicial dissolution of an LLC occurs when it is no longer reasonably practical to carry on the business in conformity with the articles of organization or operating agreement or whenever the managers or members in control of an LLC have acted in a manner that is illegal, oppressive, fraudulent, or detrimental to an LLC or a member. The petition may be filed by owners, the state Attorney General, or creditors. The process can be lengthy and expensive. You might possibly have to split the LLC assets with each partner. You can also either offer to buy their interest in the LLC or offer your own interest in the business up for sale. Generally, it must be shown that established that perpetuation of the entity would be futile and would not result in business success. It is recommended to consult an attorney in a judicial dissolution. An LLC can protect itself against a transferee of a member’s interest seeking judicial dissolution by including buy-sell provisions in its operating agreement allowing the LLC or allowing the LLC or the other members to purchase members’ interests before they are transferred to third parties