Closing your Ohio 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 Ohio. 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, 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 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.
Ohio’s LLC Act provides for an alternative method to voluntarily dissolve an LLC: unanimous written consent of all LLC members. Whether you dissolve the LLC based on rules your operating agreement or on unanimous written 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 Dissolution
After taking the necessary action to dissolve your LLC, you must file a certificate of dissolution with the Ohio Secretary of State ("SOS").
The certificate of dissolution will contain basic information about your LLC, including:
- its name
- its Ohio registration number; and
- the effective date of dissolution (which must be on or before the filing date of the certificate).
The certificate must be signed by one or more authorized representatives of your LLC. There is a $50 fee to file the certificate. Your filing should be processed within about five business days. You may pay additional fees for expedited processing. The SOS has a certificate of dissolution form available for download.
Be aware that your business name will become available for use by others once your LLC is dissolved. Also be aware that dissolution, alone, does not mean that your LLC cannot sue or be sued.
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 Ohio’s LLC Act, key winding up tasks include:
- collecting the assets of the company and gradually settling and closing its business
- disposing of and conveying LLC property that will not be distributed in kind to its members
- discharging or making reasonable provision for the LLC’s liabilities; and
- distributing any remaining assets to LLC members.
The Ohio LLC Act also states that winding up may involve “every other act necessary to wind up and liquidate the business and affairs of the company.”
When it comes to the last two listed items, discharging liabilities and making distributions to members, there are a few points to keep in mind. First, liabilities to be paid include “all contingent, conditional, or unmatured claims and obligations that are known to the company and all claims and obligations that are known to the company but with respect to which the claimant or obligee is unknown.”
Second, you are required to distribute LLC assets in a particular order. You first must 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 operating agreement provides otherwise, you should make any required distributions to current and former LLC (for example, a distribution due to a member because he or she previously withdrew from the LLC). Finally, unless your operating agreement provides otherwise, you should (a) return to members any contributions they made to the LLC not previously returned; and then (b) make distributions to members in accordance with their respective membership interests.
Ohio does not require that you obtain tax clearance before dissolving your LLC. However, the Ohio Department of Taxation ("DOT") does urge you to file various items in connection with closing your business, such as:
- a final sales tax return (if you sell goods and have a vendor’s license)
- a Form D-5 (Notification of Dissolution or Surrender) following filing and payment of your final corporation franchise tax return (if your LLC is classified as a corporation for tax purposes); and
- Forms IT-WHC (Change of Ohio Employer Name, Address or Status) and IT 941 (Ohio Employer’s Annual Reconciliation) (if you have employees).
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.