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An LLC is a common business type for many entrepreneurs and small business owners. For most companies, the creation of the business may not include a plan to cease doing business or close it out at any point. However, when it is time to close your doors and dissolve your LLC, where do you start? Proper, legal dissolution of an LLC entity may require filing Articles of Dissolution with the state. Your business’s lawyer can help you file.

What are Articles of Dissolution for an LLC?

Upon closing your business or at any time when there are no members of that LLC, the company needs to file Articles of Dissolution with the applicable state agencies governing the LLC’s existence. This is a legal document that informs the Department of State (NY) or other municipal office that the LLC is dissolved and that the business entity is no longer in operation. This is important because an LLC otherwise has obligations to the state of its formation. Dissolution halts obligations such as certain operating fees, taxes, and filing annual reports to the state.

By filing Articles of Dissolution, you are officially freeing yourself from these obligations and letting the state know. In New York, the articles are pursuant to the Limited Liability Company Law § 705.

What Should I Do Before Filing Articles of Dissolution?

When you are planning to close your business, all members of the LLC should agree on dissolution. If not everyone agrees, you should have a plan in place, including the applicable hierarchy of vote in accordance with your company’s operating agreement, articles of organization or other governing document (or by law if such document does not exist). Then, meet with your legal team. Your lawyer can help you draft a resolution to dissolve the LLC. The resolution will have to abide by the rules set in any articles of organization that your LLC has, as well as any member operating agreement, if any. If your LLC is registered to do business in another state, you have to file to withdraw from that state.

You should also contact your company’s accountant – they will help you make sure that any payments, debts, outstanding taxes, or accounts are properly handled as you wind down the business entity. This will include paying employees their final paychecks and handling any final tax return. From there, your legal team can help you file your Articles of Dissolution.

Dissolving Your LLC

Once your Articles of Dissolution are filed, you will need to liquidate and distribute any remaining business assets to the members of your LLC. For individual owners, this can be fairly simple. For LLCs with multiple members, distribution should follow the agreed upon plan which could be as simple as distribution by ownership percentages.

Why Would You Want to Dissolve Your LLC?

There could be many reasons why a business would file for dissolution. The death or major lifestyle changes of members are a common reason for dissolution. Relocating the business to another state or merging with another LLC could also result in the dissolution of the original LLC. If the business is no longer profitable, or you simply do not need the business to continue operating could also be a reason to close the business.

What Happens if I Don’t Dissolve My LLC?

Not dissolving the LLC could result in the state requiring you to be responsible for taxes, filing fees or penalties owed by the company. Dissolving can also be important for closing accounts with utility companies and other entities that bill your LLC regularly.

Menicucci Villa Panzella Calcagno PLLC does not provide tax, legal, or accounting advice through articles. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice.
For over 35 years, Menicucci Villa Panzella Calcagno PLLC has been serving businesses, families, and individuals in the New York area. With 2 locations in New York City, our legal team is ready to serve you. Contact us to schedule a consultation.