Closing your Utah 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 Utah. 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, or for administrative reasons such as failing to file annual reports or pay fees, 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.
Also, regardless of whether your articles of organization or operating agreement contain any dissolution provisions, Utah’s LLC Act allows for an alternative method to voluntarily dissolve an LLC: a written agreement signed by all LLC members.
For either approach to dissolution of your LLC—relying on rules in formational documents or using a written member agreement—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.
Articles of Dissolution
After taking the necessary action to dissolve your LLC (such as unanimous written agreement), you must file articles of dissolution with the Division of Corporations & Commercial Code (“DCCC”). To complete the articles of dissolution, you need to provide:
- the name of your LLC
- the address where service of process for your LLC may be mailed
- the effective date of dissolution; and
- a statement that dissolution occurred by written agreement of member, or else another reason for dissolution (such as unanimous member vote per an operating agreement).
There is no fee to file the articles. Your filing usually will be processed within 5-7 days. You can get expedited processing for an additional fee. An articles of dissolution form is available for download from the DCCC website.
Be aware that your business name will become available for use by others after dissolution. Also, be aware that dissolution, alone, does not prevent the commencement of a legal action by or against your LLC.
Following dissolution, your LLC continues to exist only 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 Utah’s LLC Act, key winding up tasks include:
- collecting all amounts owed to the company
- selling or otherwise disposing of the company's assets and property
- paying or discharging the taxes, debts, and liabilities of the company, or making provision for the payment or discharge; and
- and distributing all remaining company assets and property among the members of the company according to their interests.
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 creditors who are not LLC members. Note that it is particularly important that you pay all outstanding taxes. Second, you must pay LLC members who are creditors what they are owed as creditors. Third, pay expenses and costs associated with winding up. Finally, distribute any remaining assets in accordance with your articles or organization or operating agreement. If neither of the latter documents covers the matter, the remaining assets should be distributed to members based on their final capital account balances after adjusting for all profits and losses.
Also note that the LLC Act requires your company to pay claims and obligations “including all contingent, conditional, or unmatured claims and obligations, known to the company and all claims and obligations which are known to the company but for which the identity of the claimant is unknown.”
While there is no fixed time for completing the winding up, the Act states that it should be completed “within a reasonable time under the circumstances.”
Notice to Creditors and Other Claimants
One other key task, generally considered part of winding up, is giving notice to creditors and other claimants of your LLC's 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 Utah 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:
- describe information that must be included in a claim
- provide an address to which written notice of any claim must be given to the company
- state the deadline, which may not be fewer than 120 days after the effective date of the notice, by which the dissolved company must receive the claim; and
- state that, unless sooner barred by another state statute limiting actions, the claim will be barred if not received by the deadline.
You also may give notice to claimants by publishing in a newspaper. As with sending direct notice to individual claimants, there are specific rules for giving notice through publication, such as the number of times you must publish and what information the notice must contain. The deadline for a claimant to respond to the published notice may not be fewer than 120 days after the date of first publication.
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.
Utah does not require that you obtain tax clearance before dissolving your LLC.
For federal tax purposes, check the ‘final return’ box on your IRS Form 1065 (if your LLC is classified as a partnership for tax purposes), or on your IRS Form 1120 (if your LLC is classified as a corporation for tax purposes.
Note on Out-of-State Registrations
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, such as forms, mailing addresses, and filing fees, on the Utah SOS website.
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.