In the United States, limited liability companies (LLCs) are a type of business that protect owners from the liabilities or debts of the company. Taking aspects of both a corporation, sole-proprietorship, and partnership, LLCs provide many benefits.
In some cases, your LLC may be designated for a temporary amount of time, or you may wish to dissolve it. In order to maintain your limited liability, you must dissolve the company properly. This includes sending a notice to your creditors to notify them, as well as for settling debts and dissolving the business with the state of Florida.
What is Dissolving an LLC?
Dissolution is the act of dissolving an LLC. this typically occurs when the LLC is no longer generating income, or the purpose of the LLC has been completed. In other situations, the dissolution of an LLC may occur because the owners (referred to as members), cannot agree on business operating decisions.
Reasons for Dissolving an LLC
There are many personal reasons an LLC may have for dissolving, but a few common reasons as well.
- Going out of business: This would be the most common reason for an LLC to dissolve. Whether the owners decide to retire or feel the business no longer serves the purpose it once did.
- No longer makes income: Not all businesses are successful. If the business no longer makes any money, it may cost more to keep running, and in compliance, than it actually makes.
- Members unable to get along: With a multi-member LLC, sometimes the members cannot agree, or get past an argument.
- Failure to remain in compliance: Some situations involve an LLC not paying taxes, following laws, or paying compliance fees. It is possible to be involuntarily dissolved, but some LLCs decide to dissolve themselves before this occurs.
How to Dissolve an LLC
It is an unfortunate process to go through but some LLCs need to be dissolved. If you wish to dissolve your LLC in Florida, follow these steps.
Voting to Dissolve the LLC
All LLC members must agree to dissolve the LLC. This means that you will need to hold a vote, in order to certify that the LLC will be dissolved. An LLC usually lists the procedure for dissolution on the articles of incorporation (or LLC operating agreement), which means there is a specific protocol to follow.
File Articles of Dissolution
The state of Florida has documents that must be filed with the Division of Corporations, in order to dissolve. These documents will identify your company and prove that all debts are paid off. Assets must be divided, and there is a $25 fee.
No Tax Clearance Needed for Florida
In the state of Florida, you will not need a tax clearance in order to dissolve your LLC. However, for federal tax purposes, check the "final return" box on your IRS Form 1065 (if your LLC elects partnership taxation) or IRS Form 1120 (if your LLC elects corporate taxation).
Cancel Permits and Licenses
Permits and licenses cost money, but if you do not plan to continue using them, it is important you cancel them as well. Otherwise, you may be liable for fees.
Cancel EIN and Pay off Debt
Paying off your LLC debts is incredibly important. If you do not distribute the assets, cancel your EIN and pay off your debts, then you may not be able to hold on to your limited liability. This involves notifying your creditors of dissolution., selling inventory, and even liquidating assets.
What Happens after You Dissolve Your LLC?
You might wonder, how long does it take to dissolve an LLC? Typically it takes a few weeks for The Florida Department of State to dissolve an LLC entirely. You will have 120 days to revoke dissolution should you choose to. As long as you follow dissolution practices properly, you will not be liable for anything.