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 applying for an LLC in Virginia, your business becomes officially registered with the state. To end your LLC legally, you must go through a process called dissolution. Business members may consider dissolution once the LLC completes its purpose or when it stops being viable economically. 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 several steps you need to take when closing a business. It's important to take careful action to ensure proper compliance and protect yourself from future liabilities. Following the proper procedures can help you move forward quickly when winding down your business. This will protect you from being responsible for paying annual fees, filing annual reports, and paying business taxes. The following describes how to dissolve an LLC business structure. The dissolution process is state-specific, so look into your state's requirements. This article will cover the dissolution process for an LLC in Virginia.
What are some reasons for Dissolving an LLC?
There are many 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 disagree about the direction of the business, what subsequent actions to take, or how to disburse profits. Another reason is if a single person formed the LLC, the individual's death or retirement might signal the organization's end. Finally, if there are decreasing demand or liability concerns for the products sold, you may decide 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 Virginia.
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.
Step 2: File certificate of dissolution
You will then need to fill out the certificate of dissolution. These articles of cancellation must be submitted to State Corporation Commission. They can be found here. If you prefer to submit online, you must do so on their Clerk’s Information System. The articles of cancellation will contain the LLC name, the return address for the filing, the UBI number, and the signature of an authorized individual. There is a $25 filing fee.
If submitting by mail, send it to the following address:State Corporation Commission
P.O. Box 1197
Richmond, VA 23218-1197 Courier Delivery Address
1300 E. Main St, 1st floor
Richmond, VA 23219
Step 3: Winding up
After completion of the vote for dissolution, several final tasks need to be completed. This step is called 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 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.
Virginia does not require clearance before you submit your certificate of dissolution. However, you should still make sure to submit your final tax return to present any fees or penalties.
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?
Once the Secretary of State receives the certificate of dissolution, it takes approximately one month before it’s processed. If you request expedited service for an extra $50 fee, your processing may be completed as quickly as within a week.
Can you reopen your LLC after it’s dissolved?
After your LLC dissolves, you must file the Virginia Reinstatement Packet with the State Corporation Commission. You will need to fix any issues that led to your Virginia LLC’s dissolution and pay the $100 reinstatement fee. Online is the most efficient way to reinstate your LLC and will need to be done over the Clerk’s Information System. Virginia’s State Corporation Commission has a how-to guide for details on filling out the reinstatement packet.
Keep in mind that after you dissolve your LLC, the name can be requested by another entity the day of. If the name is no longer available and you want to reinstate your company, you will need to attach an amendment to the certificate of formation form and pay the filing fee to the Secretary of State.
Are you still liable for anything?
If you fail to file a tax return and pay taxes, you must contact Virginia’s Department of Taxation and finance for any due taxes, penalties, or interest. You also may be liable for any debts left unpaid.
Contact your business attorney for more information if you have any additional questions.