Closing your West Virginia 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 West Virginia. Officially ending its existence as a state-registered business entity and 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 an annual report, here we are concerned with voluntary dissolution by the LLC members.
In order to voluntarily dissolve your LLC, you 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.
Note: Unlike most other states, West Virginia’s LLC Act does not include a statutory method to voluntarily dissolve an LLC independent of an operating agreement. However, apart from stating that dissolution may be caused by “an event specified in the operating agreement,” the Act also includes a separate statement that dissolution is allowed upon “consent of the number or percentage of members specified in the operating agreement.”
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 will probably designate one or more LLC members or managers to handle the winding up.
Under West Virginia’s LLC Act, key winding up tasks include:
- preserving the company's business or property as a going concern for a reasonable time
- prosecuting and defending actions and proceedings, whether civil, criminal, or administrative
- settling disputes by mediation or arbitration
- settling and closing the company's business
- disposing of and transferring the company's property
- discharge the company's liabilities; and
- distributing the assets of the company to creditors and members.
When it comes to the last two listed items, discharging liabilities and making distributions to creditors and members, you are required to make payments in a particular order. First, you must pay creditors, including LLC members who are creditors. Note that it is particularly important that you pay all outstanding taxes. You should then distribute any remaining assets to LLC members (a) to return all contributions to the company not previously returned; and then (b) any remainder in equal shares. (Unlike some other states, West Virginia’s LLC Act does not explicitly allow for the possibility that your operating agreement may have alternate rules for member distributions upon dissolution.)
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 West Virginia law, one way to give notice is by sending a written document directly to known claimants. Proper written notice must:
- specify the information required to be included in a claim
- provide a mailing address where the claim is to be sent
- state the deadline for receipt of the claim, which may not be less than 120 days after the date the written notice is received by the claimant; and
- state that the claim will be barred if not received by the deadline.
You also may give notice to other (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 five 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.
Articles of Termination
After dissolving and winding up your LLC, you should file articles of termination with the Secretary of State (“SOS”). West Virginia does not require you to file this type of final document, instead stating that an LLC “may” terminate its existence in this manner. However, it is generally advisable to files the articles of termination. (If you have specific questions about whether to file, you should contact a local attorney.)
Articles of termination will contain basic information about your dissolved LLC, such as:
- the LLC’s name
- the date of dissolution
- a statement that the company's business has been wound up and the legal existence of the company has been terminated
- a statement that all responsibilities for filing with the Department of Tax and Revenue and any other state agencies have been completed; and
- the effective date for the articles of termination if other than the filing date.
There is a $25 fee to file the articles. Your filing usually will be processed within two business days. Immediate processing is available if you deliver the articles in person to the SOS. An articles of termination form is available for download from the SOS website.
Be aware that your business name will become available for use by others after you have terminated your LLC.
West Virginia does not require that you obtain tax clearance before dissolving your LLC. However, the articles of termination form from the SOS includes a statement that you have taken care of all filing responsibilities related to the Department of Tax and Revenue.
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 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.