When it is time for some companies to end their businesses and dissolve an LLC, it can be a multi-step process and stressful. One of the things a business must do is to approve the business dissolution. The stakeholders will have to approve the action when it comes to corporations. Members will have to approve with limited liability companies, LLC. Members or stakeholders are typically involved in daily operations when it comes to small businesses. Corporation bylaws and the operating agreement of the LLC typically detail the dissolution process and required approvals.
The board of directors will need to draft and approve the resolution to dissolve to comply with corporation formalities. Next is the vote by stakeholders on the director-approval resolution. They must also document these actions and put them in the corporate record book. Member approval and documenting the decision is recommended, even though LLCs are not subject to the same formalities.
Certificate of Dissolution Filling with the State
Members and stakeholders must file paperwork with the state to incorporate the business after they have voted for the dissolution. They will also need to file paperwork in those states if they are qualified to transact in other states.
- Some states need tax clearance for the company before they can file the Certificate of Dissolution. When this happens, the LLC or corporation must first pay any back taxes they owe.
- Each state’s process for filing the Certificate of Dissolution is not the same. As such, a business must resolve claims by notifying creditors before filing documents. As for others, companies can file after that process.
Filing Local, State, and Federal Tax Forms
Even though a business is in the process of ending operations, its tax obligations do not stop immediately. The formalities for closing the business must involve local and state tax agencies and the IRS. Owners can find a business closing checklist on the IRS website, indicating the required links and forms to additional local and state requirements. It is also crucial not to forget payroll reporting obligations when a business owner has employees. They must ensure to consult their tax adviser or accountant on their specific requirements.
Notifying Creditors of Business Closing
Employers may have to notify all of their business’s creditors through the mail, explaining:
- A statement that they can bar claims if they don’t receive them by the deadlines
- The deadline for claim submission is about 120 days from the notice date.
- A list of the information that they need to include in the claim
- The mailing address that creditors must send their claims
- That their LLC or corporate has filed the statement of intent to dissolve or has dissolved
The employer’s state can also allow for claims from unknown creditors to the company during the dissolution. The state can also require that the employer place a notice in the local paper about their business dissolution. Therefore, business owners must consult their attorneys about what their states mandates when in doubt. From here, they can work on settling creditors’ claims and the distribution of remaining assets.