How Do You Dissolve an LLC in Pennsylvania?

Closing your Pennsylvania limited liability company (LLC) will involve a variety of tasks. Among the most important are what's known as "dissolving and winding up" the business. For example, you'll need to file two forms to dissolve and wind up your LLC with Pennsylvania.

This article covers information specific to dissolving and winding up your Pennsylvania LLC. Key elements of the dissolution procedure are laid out in the following sections of Pennsylvania law: 15 Pa. Cons. Stat. §§ 8871 and following (2023).

For general step-by-step guidance, see our article on the steps to take to dissolve your LLC.

Dissolving Your LLC in Pennsylvania

Your LLC is registered with the Commonwealth of Pennsylvania. 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 might be involuntarily dissolved by the state or a court, here we're concerned with voluntary dissolution by the LLC owners (called "members").

Dissolving your business refers to the process of voting to end your LLC and filing the appropriate paperwork with the Delaware government.

Winding up your business refers to the process of:

• settling your business debts
• liquidating your assets, and
• ending your licenses, permits, registrations, and accounts.

Review Your LLC Articles of Organization and Operating Agreement

To voluntarily dissolve your LLC, you first should look at the company's formational documents:

• the articles of organization, and
• the 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. For example, your operating agreement might require two-thirds of the LLC members to vote to approve the dissolution for the vote to pass.

Make sure you follow any specific procedural requirements that might 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.

Pennsylvania's LLC laws. If your articles of organization or operating agreement don't specify when and how the LLC can be dissolved, you'll need to apply Pennsylvania's default rules for LLCs. Under Pennsylvania law, you can dissolve your LLC with the consent of all LLC members. (15 Pa. Cons. Stat. § 8871 (2023).)

Recording your decision to dissolve. For either dissolution approach—relying on rules in formational documents or on unanimous consent—you should make sure to record the decision to approve the dissolution. You can record this action in the official minutes of the dissolution meeting or on a written consent form.

Note that if you have any legal actions or proceedings filed by or against your business, dissolving your LLC doesn't stop these actions.

Filing a Certificate of Dissolution With the Pennsylvania Secretary of State

After members take the necessary action to dissolve your LLC, file a certificate of dissolution with the Pennsylvania Department of State (DOS). While filing the statement isn't required, it's a good idea to have it on record with the state.

The certificate of dissolution will contain basic information about your LLC, including:

• the name of the LLC
• the street address of the LLC's registered office; and
• a statement that the LLC is dissolved.

(15 Pa. Cons. Stat. § 8872 (2023).)

The statement must be signed by an authorized individual, such as an LLC member or legal representative. As of 2023, there's a $70 fee to file the certificate. You can download a certificate of dissolution form from the DOS. You can file the completed form online through the DOS website.

Do You Need to Obtain Tax Clearance Before Dissolving Your LLC?

Pennsylvania, unlike most other states, does require you to obtain tax clearance before dissolving your LLC. (15 Pa. Cons. Stat. § 139 (2023).) You'll need certificates from both the Department of Revenue (DOR) and the Department of Labor and Industry (DLI). To obtain those certificates, you must use a DOR Form REV-181 (application for tax clearance certificate).

Complete the form, but don't sign it. Make one copy of the form, sign each copy separately, and then mail one signed copy to the DOR and the other to the DLI. You can find more detailed instructions, including mailing addresses, on the form itself.

There's no filing fee for the Form REV-181. Be aware that it can take a month or more to receive your tax clearance certificates from the DOR and DLI.

In addition to obtaining tax clearance from the state, it's a good idea to file the following tax-related documents as part of dissolving your LLC:

• final business tax returns
• if you have employees, a final Form PA-W3 (quarterly withholding return) or other relevant tax withholding form; and
• if you sell goods, a final sales tax return.

You can use DOR Form REV-1706 to cancel a range of state-tax-related accounts, such as a sales tax license or employee tax withholding account.

When you file your federal tax return, 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).

Winding Up Your LLC in Pennsylvania

Following the vote to dissolve your LLC, the company continues to exist for the purpose of taking care of final matters that, collectively, are known as "winding up" the company. You'll probably designate one or more LLC members or managers to handle the winding up.

Under Pennsylvania's LLC laws, apart from filing a certificate of dissolution, key winding-up tasks include:

• discharge debts, obligations, and other liabilities (for example, pay creditors)
• close the LLC's activities and affairs; and
• properly distribute any remaining LLC assets.

(15 Pa. Cons. Stat. § 8872 (2023).)

Pennsylvania law requires you to take these actions as you wind up your LLC. Moreover, these tasks are natural and important steps in closing your business. Avoiding any of them can put you and your business at risk—financially and legally.

Settling Debts and Distributing Assets

When settling your company's debts and distributing its assets, Pennsylvania law requires you to make payments in a particular order:

1. to creditors (including members who are creditors)
2. to each member who made a contribution to the LLC not previously returned; and
3. to members in proportion to their respective membership rights to share in distributions.

(15 Pa. Cons. Stat. § 8877 (2023).)

For example, suppose Bigtime Management is a Pennsylvania LLC that has three members: Edie, Franco, and Gisele. The three members have equal membership interests and all agree to dissolve the business. After liquidating its assets, the company has $100,000 to distribute.

First, the LLC must pay off its creditors. So, the business pays the remaining $10,000 on a loan and $5,000 in taxes, leaving $85,000. Second, the company must pay Gisele back for the $10,000 she contributed to the business when it first started out. Third, the LLC can distribute the remaining $75,000 to the members in proportion to their membership shares. Because the members have equal interests, each member will receive $25,000.

Notifying Creditors of Your LLC's Dissolution

Pennsylvania doesn't require LLCs to notify creditors of the company's dissolution. Even though it's not required, you should let creditors know that you're planning on or have dissolved your LLC. Pennsylvania allows you to dispose of claims against your business if you send notice to the creditors and they don't submit their claims to you. However, your notice must meet certain requirements. Specifically, your notice to creditors you know about should state:

• any information creditors must include in a claim
• that the claim must be in writing
• the deadline for receiving the claim—which can't be less than 120 days after the claimant receives your notice; and
• a claim will be barred if not received by the deadline.

(15 Pa. Cons. Stat. § 8874 (2023).)

You should also put a notice of your LLC's dissolution in a local newspaper to notify any creditors you're not aware of. You can dispose of these unknown claims as well as long as you follow Pennsylvania's notice requirements. For more details about Pennsylvania's notice publication rules, check 15 Pa. Cons. Stat. § 8875 (2023).

Again, while not required, publishing a dissolution notice can help protect you from liability. For example, a creditor probably couldn't argue that you intentionally avoided paying a debt by secretly dissolving your business if you published your dissolution in the newspaper.

Canceling Out-of-State Registrations and Other Licenses and Permits

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 a:

• termination of registration
• certificate of termination of existence
• application of withdrawal, or
• certificate of surrender of right to transact business.

If you don't file the additional termination forms, you'll continue to be liable for annual report fees and minimum business taxes.

Pennsylvania doesn't require a general business license. But depending on your business and profession, you might be required to have different licenses and permits. You should cancel any licenses, permits, and registrations associated with your business. You might be able to sell or transfer some permits.

You also need to close any bank accounts in your business name. In addition, make sure to end or settle any contractual obligations. You might be able to assign your contract rights and obligations to someone else.

Filing Certificate of Termination With the Pennsylvania Department of State

When all of the property and assets of your LLC have been properly distributed, you need to cancel your articles of organization by filing a certificate of termination with the DOS. The certificate of termination will contain:

• the name of your LLC
• the registered address of your LLC
• a statement either that all known debts, obligations, and liabilities of the LLC have been paid and discharged, or that adequate provision has been made for that purpose
• a statement that all remaining property and assets of the LLC have been distributed among its members; and
• a statement either that there are no actions pending against the LLC in any court, or that adequate provision has been made for the satisfaction of any judgment that may be entered against the LLC.

As with the statement for winding up, the certificate of termination must be signed by an authorized individual, such as an LLC member or legal representative. As of 2023, the filing fee is $70. The DOS has a certificate of termination available as a downloadable form. You can file the completed form online through the DOS website.

Be aware that your business name will become available for use by others once your LLC is dissolved.

Additional Guidance on Dissolving Your LLC

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, see our checklist for closing your business and read about what you need to know about closing a business.

If you have further questions or need legal assistance, you should talk to a Pennsylvania business attorney. Many business owners can dissolve their LLCs on their own. But you might want to seek legal help if there are disagreements among members, complicated debt settlement negotiations, or ambiguous contract assignment terms.