Closing your Idaho limited liability company (LLC) will involve a variety of tasks. Among the most important are what is known as dissolving and winding up the business.
Dissolving Your LLC
Your LLC is registered with the State of Idaho. Officially ending its existence as a state-registered business entity, and putting it beyond the reach of creditors and other claimants, begins with a formal process called “dissolution.” While an LLC may be involuntarily dissolved through a court decree, this article covers voluntary dissolution by the LLC members.
In order to voluntarily dissolve your LLC, you first should look to the company’s operating agreement. In most cases, it will contain a section with rules for how to dissolve the company. Typically the rules will require a vote of the LLC members on a resolution to dissolve, and more specifically a requirement that some percentage of members vote in favor of the resolution. Make sure you follow any specific procedural requirements that may be part of the dissolution rules, such as setting a specific time to meet and vote and giving advance notice to all members regarding the meeting.
Also, regardless of whether your operating agreement contains any dissolution provisions, Idaho’s LLC Act allows for an alternative method to voluntarily dissolve an LLC: consent of all LLC members.
For either approach to dissolution of your LLC—relying on rules in formational documents or on unanimous member consent—you should make sure to record the decision to approve the dissolution in the official minutes of the dissolution meeting or on a written consent form.
Statement of Dissolution
Following dissolution, you should file a statement of dissolution with the Secretary of State (“SOS”). Idaho does not require you to file this type of final document, instead stating that an LLC “may” file the statement. However, it is generally advisable to file a statement of dissolution. (If you have specific questions about whether to file, you should contact a local attorney.)
At a minimum, the statement of dissolution must include the name of your LLC and a statement that it is dissolved. A statement of dissolution form is available for download from the SOS website. The SOS form also asks you to provide the date the LLC’s certificate of organization was originally filed and a name and address of a person who will receive an acknowledgement copy of the processed statement.
There is no fee to file the statement, and you can submit it by mail or fax. Your filing usually will be processed within about one week. For an additional $20 fee you can get expedited service.
Following dissolution, your LLC continues to exist only for the purpose of taking care of certain final matters that, collectively, are known as “winding up” the company. You may choose to designate one or more LLC members or managers to handle the winding up.
Under Idaho’s LLC Act, key winding up tasks include:
- preserving the company activities and property as a going concern for a reasonable time
- settling and closing the LLC’s business
- prosecuting and defending actions and proceedings, whether civil, criminal or administrative
- settling disputes by mediation or arbitration
- transferring the company's property
- discharging the LLC’s debts, obligations, and other liabilities; and
- marshalling and distributing LLC assets.
When it comes to the last two listed items, discharging liabilities and distributing assets, you are required to make payments in a particular order. First, you must pay creditors, including LLC members who are creditors. Note that it is particularly important that you pay all outstanding taxes. Next, you must make distributions to members for contributions to the LLC not previously returned. Finally, if any assets remain, they must be distributed in equal shares among current and dissociated members. (Note: unlike many other states, Idaho’s LLC Act does not explicitly provide for the possibility that an operating agreement may lay out alternative rules for distributing assets to members upon dissolution.)
Notice to Creditors and Other Claimants
One other key task is giving notice to creditors and other claimants of your LLCs dissolution. Giving notice is optional. However, doing so will help limit your liability and also allow you to more safely make final distributions to members.
Under Idaho law, one way to give notice is by sending a written document directly to known claimants after dissolution. Proper written notice must:
- specify the information required to be included in a claim
- provide a mailing address to which the claim is to be sent
- state the deadline for receipt of the claim, which may not be less than 120 days after the date the notice is received by the claimant; and
- state that the claim will be barred if not received by the deadline.
You also may give notice to other (unknown) claimants by publishing in a newspaper. As with sending direct notice to individual claimants, there are specific rules for giving notice through publication. Generally speaking, claimants have five years after the date of newspaper publication to bring a claim.
There can be certain advantages to giving direct written notice to individual claimants. In any case, if you choose to give claimants notice of your LLC’s dissolution, you should strongly consider getting assistance from a business attorney.
Statement of Termination
After dissolving and winding up your LLC, you have the option to file a statement of termination with the SOS. A statement of termination simply provides the name of your LLC and a statement that it has been terminated. The statement generally is used in only in unusual circumstances, and you probably won’t need to file it. However, if you have any questions on the matter, you should contact a local attorney.
Idaho does not require that you obtain tax clearance before dissolving your LLC.
For federal tax purposes, check the “final return” box on your IRS Form 1065 (if your LLC is classified as a partnership for tax purposes) or IRS Form 1120 (if your LLC is classified as a corporation for tax purposes).
Is your LLC registered or qualified to do business in other states? If so, you must file separate forms to terminate your right to conduct business in those states. Depending on the states involved, the form might be called a termination of registration, certificate of termination of existence, application of withdrawal, or certificate of surrender of right to transact business. Failure to file the additional termination forms means you’ll continue to be liable for annual report fees and minimum business taxes.
You can find additional information, such as forms, mailing addresses, and filing fees, on the SOS website.
For information on dissolving and winding up LLCs formed in other states, check Nolo’s 50-state series on dissolving LLCs.
Final Advice: Dissolving and winding up your LLC is only one piece of the process of closing your business. For further, general guidance on many of the other steps involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.