Limited liability companies are businesses in the United States that protect owners from the liabilities and debts of their companies. They are similar to corporations, but also similar to partnerships and sole proprietorships. Essentially an LLC embodies different parts of many entities and allows you to elect taxation.
If you no longer want to operate your business, you can dissolve your LLC. This essentially means canceling the business. Although it is a simple process, you will need to take specific steps in order to dissolve the LLC. This is important because otherwise, you may lose your liability protection.
What is Dissolving an LLC?
The act of dissolving an LLC is dissolution. It generally occurs when the business purpose of the LLC is completed, or it is no longer making money. LLC members may also decide to dissolve an LLC if they cannot agree on decisions for the business.
Reasons for Dissolving an LLC
As mentioned, generally the act of dissolution occurs when an LLC no longer wishes to operate. There are cases where the business purpose of an LLC is completed. If this is the case, it would have originally been filed as an LLC with a limited amount of time.
Although dissolution is most common when a company is going out of business, it can also be because the LLC is no longer generating revenue. Other reasons for dissolution may be due to members being unable to come together on decisions, or because they are ready to retire.
Sometimes an LLC may be at risk for involuntary dissolution this can be due to not paying taxes or following compliance laws.
How to Dissolve an LLC in New Mexico
Dissolving an LLC is never the goal but it does happen for various reasons. Some good, some bad. Either way, it’s important that you make it a smooth process. Here’s how to dissolve a New Mexico LLC successfully.
Vote to Dissolve the LLC
An LLC is different from a corporation in that all LLC members must agree to dissolve an LLC before it happens. This means that voting is the first step in the dissolution of your company. The vote should follow the right procedure that is listed in the article of organization. These are written when the LLC is formed.
File Articles of Dissolution
The state of New Mexico has specific dissolution documents that must be completed and filed with the state. In New Mexico, there is a required $25 filing fee, but same-day processing requires an additional $300 fee.
Cancel Permits and Licenses
Most businesses require permits and licenses to operate. You will need to cancel your permits and licenses in order to avoid the state assuming you are still in business and looking for compliance fees.
Cancel EIN and Pay off Debts
One of the final stages of dissolving an LLC involves paying off debts and canceling your EIN. This is essential because it dissociates you from any business fees or legal ties. When an LLC dissolves it is also important to distribute the assets of the business. This may include selling equipment or property and inventory. Creditors will also need to be notified.
What Happens after you dissolve your LLC
When you dissolve an LLC it can take up to fifteen days to process, but typically only takes 3 to 5 days. After it is dissolved you will receive a certificate of termination. Then you will need to file Form 05-359, Request for Certificate of Account Status, which typically takes 4-6 weeks to process. Finally, you will receive your tax clearance.
You can reopen an LLC, but you will need to basically follow the same steps you took to start the LLC in the first place. As long as you follow all the required procedures dissolving your LLC, you will not be liable for anything related to the business.
