Closing your New Mexico 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.
Your LLC is registered with the State of New Mexico. 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 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 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.
New Mexico’s LLC Act allows for an alternative method to voluntarily dissolve an LLC: written consent by LLC members with a majority share of members’ voting power. Unless your operating agreement prohibits it. you can use this alternative method to dissolve your LLC. Whether you dissolve your LLC based on rules in your articles of organization or operating agreement, or on majority member consent, be sure to record the decision to approve the resolution in the official minutes of the dissolution meeting or on a written consent form.
After you have taken the required vote, obtained majority written consent, or otherwise taken the necessary action to dissolve your LLC, you must file articles of dissolution with the New Mexico Public Regulations Commission ("PRC").
The articles of dissolution will contain basic information about your LLC, such as:
Note: The last listed item should not be relevant for the type of voluntary dissolution covered in this article.
The articles must be signed by one or more authorized individuals, and more specifically by each person mentioned in the articles as having authority to act for the LLC in connection with winding it up. You must submit both an original and one copy of the articles to the PRC.
There is a $25 fee to file the articles. It typically should take less than a week for your filing to be processed. You may pay additional fees for expedited processing. The PRC has an articles of dissolution form along with instructions available for download.
Be aware that your business name will become available for use by others once your LLC is dissolved.
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 New Mexico’s LLC Act, key winding up tasks include:
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, or make adequate provision to pay, creditors (including LLC members who are creditors) to the extent permitted by law. It is particularly important that you pay all outstanding taxes. Next, unless your formational documents provide otherwise, you should make distributions to current and former LLC members based, for example, on previous votes to distribute to those members, or possibly on a member’s dissociation or voluntary withdrawal from the LLC. Finally, if any assets still remain, you should distribute them to the members based on the terms of your articles of organization or operating agreement, or else proportionally based on each member’s capital contributions to the company after adjustments.
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 New Mexico 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 in a newspaper. As with sending direct notice to individual claimants, there are specific rules for giving notice through publication. Generally speaking, claimants 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.
New Mexico does not require that you obtain tax clearance before dissolving your LLC. However, the state Taxation and Revenue Department ("TRD") does urge you to notify them of your dissolution by filing Form ACD-31075 (Business Tax Registration Update), and also to submit a Form CRS-1 (covering receipts tax and other taxes) for every reporting period up to your LLC’s dissolution date. Both forms are available for download from the TRD.
For federal tax purposes, make sure to check the “final return” box on your IRS Form 1065 when you file your final federal tax return.
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.
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.