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By The Wyoming LLC Attorney Team

May 04, 2023
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Dissolving an LLC in Arizona

How to Start an LLC

Summary

An LLC is a separate legal entity that offers personal asset protection and flexible management structures, taxed as pass-through entities by default. The process to dissolve an LLC in Arizona involves several steps, including a vote to dissolve, tying up the affairs, and filing a Certificate of Dissolution with the Arizona Corporation Commission. Dissolving an LLC can be due to many reasons such as lack of profitability, change in ownership, retirement, legal disputes, or bankruptcy.

A Limited Liability Company (LLC) is a type of business entity that offers the owners personal asset protection, flexible management structures, and pass-through taxation. In Arizona, LLCs are governed by the Arizona Limited Liability Company Act.

What Is an LLC

LLCs are a business structure that are considered separate legal entities from their owners, meaning that the owners are not personally liable for the company's debts or legal obligations. This protection of personal assets is one of the main reasons that many entrepreneurs choose to form an LLC rather than operating as a sole proprietorship or general partnership.

In an LLC, owners are referred to as members, and the LLC can be managed by the members or by appointed managers. This flexible management structure allows owners to choose how involved they want to be in the day-to-day operations of the business.

LLCs in Arizona are also taxed as pass-through entities by default, meaning that the company itself does not pay income tax. Instead, the profits and losses of the company are passed through to the members and reported on their personal income tax returns.

To form an LLC in Arizona, you must file Articles of Organization with the Arizona Corporation Commission and pay a filing fee. The Articles of Organization include basic information about the company, such as its name, address, and the names and addresses of its members or managers.

After forming an LLC, owners should draft an Operating Agreement that outlines how the company will operate, including the roles and responsibilities of the members or managers, voting procedures, and profit distribution. Although an Operating Agreement is not required by Arizona law, it can help prevent disputes among owners and ensure that the company is properly structured.

Start an LLC in Arizona

What Is Dissolving an LLC

Dissolving an LLC in Arizona means legally terminating the existence of the company. There are several reasons why an LLC may need to be dissolved, including when the business is no longer profitable, when there is a change in ownership, or when the owners simply want to move on to other endeavors.

The process of dissolving an LLC in Arizona involves several steps. First, the owners must vote to dissolve the company in accordance with the LLC's Operating Agreement or Arizona law. If there is no Operating Agreement or the agreement is silent on the matter of dissolution, Arizona law requires that all members vote to dissolve the company.

After the vote to dissolve, the LLC must tie up its affairs. This involves settling any outstanding debts, selling assets, and distributing any remaining funds to the owners. The LLC must also provide notice to any creditors and file a Certificate of Dissolution with the Arizona Corporation Commission.

The Certificate of Dissolution must include the name of the LLC, the date of dissolution, and a statement that the LLC has settled all outstanding debts and obligations. The LLC must also provide a list of the names and addresses of its members and a statement that the members have authorized the dissolution.

Once the Certificate of Dissolution has been filed with the Arizona Corporation Commission, the LLC is considered dissolved. However, the LLC may still be subject to certain obligations, such as tax filings and other regulatory requirements. It is important to consult with an attorney or tax professional to ensure that all necessary steps are taken to properly dissolve the LLC.

Dissolving an LLC in Arizona involves several steps and requires careful attention to legal and regulatory requirements. However, properly dissolving an LLC can help owners avoid legal and financial complications down the line and allow them to move on to new ventures with a clean slate.

Reasons for Dissolving an LLC

There are many reasons why an LLC in Arizona may need to be dissolved. Dissolving an LLC means legally terminating the existence of the company. This can occur voluntarily or involuntarily. Here are some of the most common reasons for dissolving an LLC in Arizona:

  1. Lack of profitability: An LLC may be dissolved if it is no longer generating enough revenue to justify its continued existence. This can occur when a business is struggling to make sales or has high overhead costs that cannot be met.
  2. Change in ownership: If there is a change in ownership or a disagreement among members, it may be necessary to dissolve the LLC. This can happen when members want to pursue different business strategies or when they cannot agree on how to operate the company.
  3. Retirement: Owners of an LLC may choose to dissolve the company when they are ready to retire or move on to other ventures.
  4. Legal disputes: Legal disputes can arise between LLC members, or between the LLC and outside parties, which can result in the dissolution of the LLC.
  5. Bankruptcy: If the LLC is unable to pay its debts and obligations, it may need to file for bankruptcy and dissolve the company.

Regardless of the reason for dissolution, it is important to follow the proper legal procedures to ensure that the LLC is properly terminated. This includes settling any outstanding debts, selling assets, and distributing any remaining funds to the owners.

How to Dissolve an LLC in Arizona

Dissolving an LLC in Arizona requires a series of steps and legal procedures to be followed. It is important to follow these steps to ensure that the process is completed legally and correctly. Here are the specific steps to dissolve an LLC in Arizona:

Step 1: Vote to dissolve the LLC

The first step to dissolving an LLC in Arizona is to have a meeting with all members of the LLC to discuss and vote on dissolution. If the LLC has an operating agreement, the agreement may outline the procedure for dissolving the LLC. If there is no operating agreement or it does not address dissolution, Arizona law requires a unanimous vote by all members to dissolve the LLC.

Step 2: Tie up the affairs of the LLC

Once the vote to dissolve the LLC has been passed, the LLC must wrap up its affairs. This includes settling any outstanding debts and obligations, paying creditors, selling assets, and distributing any remaining funds to the owners.

Step 3: File Articles of Dissolution

The LLC must file Articles of Dissolution with the Arizona Corporation Commission. This can be done online or by mail. The Articles of Dissolution must include the name of the LLC, the date of dissolution, and a statement that the LLC has settled all outstanding debts and obligations. The LLC must also provide a list of the names and addresses of its members and a statement that the members have authorized the dissolution.

Step 4: Cancel all permits, licenses, and registrations

The LLC must cancel all permits, licenses, and registrations with any state or local government agencies that it is registered with. This includes canceling business licenses and tax registration.

Step 5: Notify creditors and other parties

The LLC must provide notice of the dissolution to any creditors, vendors, or other parties that the LLC has had dealings with. This notification can be sent by mail or email.

Step 6: File final tax returns

The LLC must file its final tax returns with the Arizona Department of Revenue and the Internal Revenue Service. The LLC must also pay any final taxes owed.

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By following these steps, an LLC in Arizona can be legally dissolved. It is important to ensure that all legal and regulatory requirements are met to avoid any legal or financial complications in the future. It is recommended to seek the advice of an attorney or accountant to ensure that all necessary steps are taken to dissolve the LLC properly.

How Long Does It Take to Dissolve an LLC in Arizona

The process of dissolving an LLC in Arizona can take several weeks or even months, depending on a variety of factors. The amount of time it takes to dissolve an LLC in Arizona will depend on the complexity of the LLC’s financial and legal affairs, as well as the efficiency of the LLC’s wind-up process.

In general, the process of dissolving an LLC in Arizona involves several steps, including holding a meeting with all members to discuss and vote on dissolution, winding up the affairs of the LLC, filing Articles of Dissolution with the Arizona Corporation Commission, canceling all permits, licenses, and registrations, notifying creditors and other parties, and filing final tax returns.

Each of these steps can take time, and it is important to ensure that all legal and regulatory requirements are met to avoid any legal or financial complications in the future. Working with an attorney or accountant can help ensure that the dissolution process is completed as efficiently as possible. In general, it is recommended to allow several weeks to several months for the full dissolution process to be completed.

What Happens After You Dissolve Your LLC in Arizona

After you dissolve your LLC in Arizona, you cannot reopen the same LLC. Dissolution is a permanent process that cannot be undone. If you wish to start a new business, you would need to form a new LLC.

Regarding liability, dissolving an LLC does not protect the owners from any liabilities that arose during the time the LLC was in operation. Therefore, if the LLC had any outstanding debts, the owners may still be personally liable for those debts even after the LLC is dissolved.

Additionally, if any legal actions or lawsuits were pending against the LLC, dissolving the LLC does not necessarily end those legal actions. The owners may still be personally liable for any legal judgments or settlements that may arise from those actions.

It is important to properly wrap up the affairs of the LLC and settle any outstanding debts and obligations before dissolving it to minimize the risk of personal liability. This includes filing all necessary tax returns, canceling all permits and licenses, settling all debts, and distributing any remaining assets.

In summary, dissolving an LLC in Arizona is a permanent process that cannot be undone. The owners may still be personally liable for any outstanding debts or legal actions that arose during the time the LLC was in operation, so it is important to properly take care of the outstanding affairs of the LLC before dissolving it to minimize the risk of personal liability.