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Dissolving a New York LLC

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What is an LLC?

A limited liability company (LLC) is a business structure in the United States whereby the owners are not personally liable for the company's debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.

What is Dissolving an LLC?

When you apply for an LLC, your company is officially registered with the State of New York. Ending this business officially is done through a process of dissolution. Dissolution generally occurs when the business purpose of the LLC is completed or ceases to be economically viable. The members may also agree to dissolve the LLC if they are at an impasse regarding fundamental decisions concerning the LLC's business operations.

There are many steps to closing a business. Owners must take careful action to ensure proper compliance and protect themselves from future liabilities. Following the proper procedures can help you move forward quickly when winding down your business. This will ensure that you are no longer responsible for paying annual fees, filing annual reports, and paying business taxes. The following describes how to dissolve an LLC business structure. Actions to dissolution are state-specific, so make sure you look into your state's requirements. This article will cover the dissolution process for an LLC in New York

What are some reasons for Dissolving an LLC?

There are several reasons for dissolving an LLC. This can include that the company is going out of business, is not paying its taxes, or following state regulations. In some cases, LLCs are created to fulfill a purpose. Once the goals are completed, there may be no reason to continue the LLC. Members may also get into disagreements about the direction of the business, what subsequent actions to take, or how to disburse profits. The members may elect to dissolve in this circumstance. Another reason is if a single person formed the LLC, the death or retirement of the individual might signal the end of the organization. Finally, if there are decreasing demand or liability concerns for the products sold, you may elect to dissolve the business as running the company no longer becomes profitable.

How to dissolve an LLC?

There are some basic steps to dissolving an LLC in New York.

Step 1: Vote to dissolve the LLC

Review your company’s operating agreement. Most likely, it will contain information on how to dissolve the company. Typically this includes a vote amongst the members on whether to dissolve your company. If so, ensure you follow the requirements as part of the dissolution rules, including setting up the meeting to vote and providing notice to all members.

If it is not outlined in these documents, follow the procedures in your state's LLC laws. In New York’s LLC Act, the alternative method, if not outlined in your operating agreement, is to perform a majority vote amongst LLC members. Record the vote. Make sure to keep it in the business's official records.

Step 2: File articles of dissolution

You must file the articles of dissolution within 90 days after performing step 1. These articles of dissolution must be submitted to the New York Department of State. They can be found here. The articles of dissolution will contain the LLC name, any other names that the LLC went by, the date the articles of organization were filed, and the reason for dissolution. An authorized individual must sign the articles of dissolution. There is a $60 filing fee.

Step 3: Winding up

After completion of the vote for dissolution, several final tasks need to be completed. This step is referred to as winding-up and means closing the operations of a business, selling assets, paying creditors, and distributing assets to members. One or more LLC members may be designated to take charge of this step.

Step 4: File the final tax return

Certain states require LLC owners to obtain a tax clearance, consent to dissolution or verify good standing from the state's tax agency. You may be required to file your last tax return before applying for dissolution. Make sure to indicate that this will be your company's final tax return. You can submit a request electronically or via mail to receive the clearance from your state's tax agency. If you are up to date on filing tax returns, you will receive the certificate that declares you have no tax liability.

New York does not require you have tax clearance before dissolution. However, you still should file your final business tax returns, Form NYS-45 if you have employees, and a final sales tax return if you sell taxable goods or services.

Other necessary actions:

Other steps needed when properly closing a business include letting go of employees and settling severance packages, paying final payroll taxes, negotiating contract cancellations, and canceling business licenses and permits.

Finally, you'll have to close your business bank accounts, and your Federal Employer Identification Number and state tax identification number will be inactivated.

If your business operates in other states, you will need to also file separate forms to terminate your right to conduct business in each of the states. You will continue to be liable for annual report fees and minimum business taxes otherwise.

How long does it take to dissolve an LLC?

Standard processing times can vary depending on how many applications and papers the Division of Corporations received at any given time. Estimated times can vary anywhere from several weeks to months.

There are expedited handling services that NYS department of state’s Division of corporations provides. The options are listed below:

  1. $25 per document for processing within 24 hours
  2. $75 per document for same-day processing
  3. $150 per document for processing within 2 hours

Can you reopen your LLC after it’s dissolved?

Once you dissolve your LLC or corporation, you can not bring it back. Therefore it is crucial to ensure that you want to dissolve your company before filing for dissolution.

Are you still liable for anything?

If you fail to file a tax return and pay taxes, you must contact the New York Department of Taxation and finance for any taxes, penalties, or interest due. You also may be liable for any debts left unpaid.

Other questions?

If you have any additional questions, contact your business attorney for more information.