Closing your Maine 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 Maine. Officially ending its existence as a state-registered business entity and, by extension, putting it beyond the reach of creditors, begins with a formal process called dissolution. While an LLC may be involuntarily dissolved by the state for administrative reasons, such as failure to file an annual report or failure to pay required fees or penalties, here we are concerned with 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.
You should also be aware that, regardless of whether your operating agreement contains any dissolution provisions, Maine’s LLC Act provides an alternative method to dissolve an LLC: obtaining consent of all the members.
Regardless of whether you dissolve the LLC based on rules in your operating agreement or on unanimous member consent, you should make sure to record the decision to approve the resolution in the official minutes of the dissolution meeting or on a written consent form.
Certificate of Cancellation
After you have voted to dissolve your LLC, you must file a certificate of cancellation with the Secretary of State. The certificate will contain basic information about your LLC, such as when it was formed and when it was dissolved, along with authorized signatures. There is a $75 fee to file the certificate. It will take about 5-10 business days for the Secretary of State to process your filing.
Be aware that your business name will become available to others as soon as the Secretary of State processes your certificate of cancellation.
After filing the certificate of dissolution, your LLC is expected to stop doing business, except for taking care of certain final matters that are known collectively as winding up the company. Under Maine’s LLC Act, these final matters most likely will include:
- collecting LLC assets
- disposing of LLC property that will not otherwise be distributed to members
- discharging or making provision to discharge the LLC’s liabilities; and
- after paying creditors, distributing all remaining LLC property, including money, to LLC members in proportion to their ownership interests.
With regard to distribution of LLC assets, you are required to first pay the LLC’s creditors, including any LLC members who are creditors, to the extent permit by law. You are then required to make distributions to LLC members who previously made contributions to the LLC that have not been returned. Finally, if any assets remain, they should be distributed to LLC members in proportion to their ownership interests prior to dissolution.
Notifying Creditors and Other Claimants
One other key task, generally considered part of winding up, is giving notice of your LLC’s dissolution to creditors and other claimants. Giving notice is optional. However, doing so will help limit your liability and can allow you to more safely make final distributions to LLC members.
Under Maine law, a key way to give notice is by sending a written document directly to known claimants after the effective date of dissolution. Proper written notice must:
- describe the information required to be included in a claim
- provide a mailing address to which the claim is to be sent
- state the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved limited liability company must receive the claim; and
- state that, if not sooner barred, the claim will be barred if not received by the 120-day deadline, or, if received but rejected by that deadline, if a proceeding to enforce the claim is not commenced within 90 days of the effective date of rejection.
You may also give notice to other (unknown) claimants by publishing a notice in a newspaper. As with sending direct notice to individual claimants, there are specific rules for giving notice through publication, including specific items that the published notice must contain. Claimants generally have three 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.
Note on Tax Clearance
Unlike some other states, Maine does not require you to obtain clearance from Maine Revenue Services in order to dissolve your LLC.
You can find a certificate of cancellation form, as well as information on mailing addresses and additional filing fees (such as for expedited service), on the Secretary of State’s website.
For information on dissolving and winding up LLCs formed in other states, check Nolo’s 50-state guide on dissolving LLCs.
Note: 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 article on what you need to know about closing a business.