Closing your Indiana 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 Indiana. 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, or for administrative reasons such as failure to file a biennial report, here we are concerned with voluntary dissolution by the LLC members.
Regardless of when your LLC was formed, in order to voluntarily dissolve, you first should look to the company’s formational documents—the articles of organization and operating agreement. In most cases, one of those two documents 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.
Indiana’s LLC Act also allows for an alternative method to voluntarily dissolve an LLC. The method will vary slightly depending on when your LLC was formed, as follows:
Date LLC Formed
Alternative Method for Voluntary Dissolution
Before July 1, 1999
Written consent of all LLC members
Between July 1, 1999 and June 30, 2013
Written consent of two-thirds of the member interests if there is one class or group of members, or written consent of two-thirds of the member interests in each class or group of members if there is more than one class or group
After June 30, 2013
Unanimous consent of all members unless a written operating agreement provides that dissolution may be authorized by a lesser vote
For either approach to dissolution of your LLC—relying on rules in formational documents or on one of the listed alternative methods—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.
Note that dissolution, alone, does not prevent the commencement of lawsuits or other proceedings by or against your LLC, nor does dissolution abate or suspend proceedings already pending by or against your company.
Following dissolution, your LLC may only carry on business appropriate for 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 Indiana’s LLC Act, key winding up tasks include:
- collecting LLC assets
- disposing of LLC properties that will not be distributed in kind to members
- discharging or making provision for discharging LLC liabilities; and
- distributing remaining LLC property among the members.
When it comes to the last two listed items, discharging liabilities and making distributions to members, you are required to make payments in a particular order. First, you must pay creditors, including LLC members who are creditors, to the extent permitted by law. Note that it is particularly important that you pay all outstanding taxes. Next, unless otherwise provided in a written operating agreement, you must pay current and former members any required “interim distributions” and any distributions due to dissociated members. (Interim distributions generally are approved payments to members unrelated to dissolution.) Finally, unless otherwise provided in a written operating agreement, you must distribute any remaining assets to members proportionally in return for their contributions to the LLC. (The actual language of Indiana’s LLC Act on this last point is a little unusual: The remaining assets are to be distributed “to members in proportion to the return contribution.” If you find yourself facing a disagreement among members regarding final distributions, seek assistance from a local business attorney.)
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 Indiana law, one way to give notice is by sending a written document directly to known claimants after dissolution. Proper written notice must include:
- the amount that the dissolved LLC believes will satisfy the claim
- a statement that the creditor has the right to dispute the amount of the claim and a description of the procedure for disputing the amount of the claim
- a mailing address where a dispute of the amount of the claim may be sent
- the deadline for receiving disputing claims, which may not be less than 60 days after the effective date of the written notice; and
- a statement that the claim will be fixed at the amount specified by the dissolved limited liability company if a dispute of the amount of the claim is not received by the deadline.
Additional rules apply regarding notices concerning disputed claim amounts.
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 two 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.
Articles of Dissolution
After dissolving your LLC, you should files articles of dissolution with the Secretary of State (“SOS”). Indiana does not require you to file this type of final document, instead stating that an LLC “may” file the articles. However, it is generally advisable to file articles of dissolution. (If you have specific questions about whether to file, you should contact a local attorney.)
To complete the articles of dissolution, you must provide:
- the name of your LLC
- the date of filing of the LLC’s articles of organization
- the address of the LLC’s principal office; and
- the date of dissolution.
You may file the articles in person, by mail, or online. For paper filings, you should submit an original and one copy, along with the $30 filing fee. For online filings the filing fee is $20. Processing time will vary depending on how you deliver your filing: walk-ins and filings sent via express mail should be processed by noon of the following day, and mailed-in filings usually require 3-5 business days. An articles of dissolution form is available for download from the SOS website.
Be aware that your business name will become available for use by others after dissolution.
Indiana does not require that you obtain tax clearance before dissolving your LLC. However, the SOS does suggest that you consider filing a notice of voluntary dissolution with the Department of Revenue (“DOR”) and other state agencies. (The DOR itself urges you to file various tax forms.)
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 current filing fees, as well as links to the online filing system, 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.