Closing your Montana 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.
NOTE: Montana’s LLC Act has been revised and different rules take effect on October 1, 2013. This article is based on the revised Montana laws.
Your LLC is registered with the State of Montana. 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 through a court decree, here we are concerned with voluntary dissolution by the LLC members.
In order to voluntarily dissolve your LLC, you should look to the company’s formational documents--the articles of organization and the operating agreement. One of those two documents should 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 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 be sure to record the decision to approve the resolution in the official minutes of the dissolution meeting or on a written consent form.
Following the vote to dissolve your LLC, the company continues to exist for the purpose of taking care of certain final matters that, collectively, are known as “winding up” the company. You will probably designate one or more LLC members or managers to handle the winding up.
Under Montana law, key winding up tasks include:
There are specific rules for paying creditors and for making distributions to LLC members. You must first pay your LLC’s creditors, including any LLC members or managers who are creditors, to the extent permitted by law. Then, you should make distributions to members based on the rules in your operating agreement. Typically, those are done as follows. First, distributions that are due to members based on events such as prior withdrawal from the company. Then, assets should be distributed to members in return for contributions they made to the LLC, and, finally, any remaining assets should be distributed to members based on the proportions in which members share in distributions.
One other key task, generally considered part of winding up, is giving notice of your LLC’s dissolution to creditors and other claimants. While notice is optional, doing so will help limit your liability and also allow you to more safely make final distributions to members.
Under Montana law, one way to give notice is by sending a written document directly to known claimants after the effective date of dissolution. Proper written notice must:
You also may give notice to unknown claimants by publishing a notice in a newspaper. As with sending written notice directly to individual claimants, there are specific rules for giving notice through publication, including specific items that the published notice must contain. 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. If you choose to give claimants notice of your LLC’s dissolution, you should strongly consider getting assistance from a business attorney.
After dissolving and winding up your LLC, you must file articles of termination with the Montana Secretary of State. The articles of termination contain basic information about your LLC, including:
There is a $15 fee to file the articles of termination.
Montana does not require you to get tax clearance from the Department of Revenue before you can dissolve your LLC.
Wen you file your final federal tax return, make sure to check the “final return” box on your IRS Form 1065.
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, including mailing addresses, filing fees, and a form for the articles of termination on the Montana Secretary of State website.
For information on dissolving and winding up LLCs formed in other states, check Nolo’s 50-state series 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 Nolo article on what you need to know about closing a business.