Closing your Washington, D.C. 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 District of Columbia. Officially ending its existence as a state-registered business entity, and putting it beyond the reach of creditors and other claimants, begins with a formal process called dissolution. While an LLC may be involuntarily dissolved through court action, this article covers voluntary dissolution by the LLC members.
In order to voluntarily dissolve your LLC, you first should look to your 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 more specifically 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 operating agreement contains any dissolution provisions, D.C.’s LLC Act allows for an alternative method to voluntarily dissolve an LLC: consent of all LLC members.
For either approach to dissolution of your LLC—relying on rules in the operating agreement or on unanimous member consent—you should make sure to record the decision to approve the dissolution in the official minutes of the dissolution meeting or on a written consent form.
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 may choose to designate one or more LLC members or managers to handle the winding up.
Under Washington, D.C.’s LLC Act, key winding up tasks include:
The first four items on this list are optional, but the final three items are mandatory.
When it comes to the last two listed items, discharging liabilities and distributing assets, you are required to make payments in a particular order. First, you must pay creditors, including members who are creditors. Note that it is particularly important that you pay all outstanding taxes. Next, you must pay members and persons with a transferable interest in the company an amount equal to any unreturned contributions to the LLC. Finally, if any assets remain, you must make distributions in equal shares among members and dissociated members. (Regarding the last point, other distributions may be required if members have transferred their interests in the company to other people.)
One other key task 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 Washington, D.C. law, one way to give notice is by sending a written document directly to known claimants after dissolution. Proper written notice must:
You also may give notice to other (unknown) claimants by publishing in a District 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.
After dissolving your LLC, you must file a statement of dissolution with D.C.’s Department of Consumer and Regulatory Affairs (“DCRA”). To complete this document, you must, at a minimum, provide the name of your LLC and a statement that it is dissolved. However, you may find it easiest to use the statement of dissolution form available for download from the DCRA. That form requires you to provide:
The DCRA form also includes the statement that your LLC is dissolved, as well as a statement that it will discharges debts, obligations, or other liabilities, settle and close the company's activities, and marshal and distribute assets. If you use the DCRA form, you should not alter the preprinted information.
There is a $220 fee to file the statement of dissolution. Your filing usually will be processed in about 15 business days. Various forms of expedited processing are available for aldditional fees.
Be aware that your business name will become available for use by others after dissolution.
Washington, D.C. 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 IRS Form 1120 (if your LLC is classified as a corporation for tax purposes).
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 DCRA 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.