LLCs and corporations offer the owners of the companies liability protection. This means that the owners of the corporations are not liable for the debts of the company. Still, closing an LLC or corporation is not as simple as it might seem at first. Even when the owners are not liable for the debts personally, there are some necessary steps for company dissolution.
Using these steps, the company owners protect themselves from any future implications. These steps also help owners to sell the remaining company owned assets before the proper dissolution of the company.
Why Closing an LLC Or Corporation Is Necessary?
It is common that the owners of the LLC and corporation are not liable for the debts of the company. However, when the owners leave their LLC or corporation hanging, they can be made liable for the debts of the company. Moreover, the LLC pays an annual fee to the states for the license, leaving companies not dissolving an LLC or corporation that can render the status of the company illegal in some states.
Furthermore, when you do not properly dissolve an LLC, property owned by the LLC is unusable. It is necessary to properly dissolve a company to get back the ownership of the property. Companies do business on their behalf by using their name in the official documentation.
When you do not dissolve an LLC or a corporation, anyone can use its name, and you will be implicated in that. When you leave your LLC or corporation name and permits open, you need to also keep monitoring their activity. Or else, someone else can misuse these credentials to leave you in legal jeopardy.
Steps to Complete Dissolution
There are some basic steps that help members to close LLC without any future legal or otherwise implications. Hiring a registered agent helps the process as they know what they are doing.
Furthermore, creating a business checklist also offers assistance in completing these steps. Business dissolution is different from ownership transfers.
As in the later case, you can simply use the LLC transfer of Ownership form to be done with the LLC in case of complete dissolution, you need to follow the following steps.
Agree to Dissolve
Before one can begin to dissolve an LLC or a corporation, all members and stakeholders need to be on the same page. In a partnership, one member or shareholder of the company cannot dissolve the company without others’ approval. To begin with the vote to dissolve the company. Once the vote is in favor, you can move to the next step.
Make it Official
To make it official, you need to fill up a form available on the Secretary of State’s website. Fill and submit that form to make your company dissolution official.
Once you begin with the dissolution of your LLC or corporation, you need to notify your creditors. This helps those creditors to file any lawsuit for any debt your LLC or corporation has.
Wrapping up Finances
Before the dissolution of an LLC or corporation, the company needs to clear all its debts and bills. Before a company distributes its remaining assets to the members or shareholders, it needs to clear the remaining debts. The members and shareholders are personally responsible to the creditors. So, make sure you clear the creditors before LLC or corporation dissolution.
The next step is to complete all the taxes for which the LLC or corporation is responsible. Before you close your LLC or corporation officially, states need you to file a final tax return. On the tax return form, do not forget to mark the box for the final tax return. Schedule K-1 form helps you distribute the tax information to all the members so that they can report their personal taxes accurately.
Closing Things Down
Once you are done with the financials of the corporation or the LLC, you need to close things down for the LLC or corporation. This includes every account, license or permits the company holds in its name. For LLC, this also includes nullification of the LLC Membership Certificate and LLC operating agreement.
Dividend Division and Distribution
When you successfully deal with all the taxes and debts your LLC or corporation is liable for, you can continue with distributing the dividends among the members/shareholders.
Using these simple steps, anyone can successfully close an LLC or a corporation.