Under the LLC laws of the various states, there is always a procedure to formally shut down a single-member limited liability company (SMLLC). In most cases, closing an SMLLC, known in legal lingo as dissolving and winding up the business, usually involves a few basic steps.
First, you should look at your company's formational documents—the articles of organization and operating agreement. In some cases, one of those two documents will contain a section with rules for dissolution. If, however, neither your articles of organization nor operating agreement has any such rules, most states will allow you to approve dissolution by simply recording that you, as the sole SMLLC member, want to dissolve the company. Regardless of whether you are following rules in a formational document or your state's LLC statute, you should make sure to record your decision in writing.
In most states, after deciding to dissolve your SMLLC, you must files articles of dissolution with the secretary of state. In some states, you need to file articles of dissolution or a separate document before you begin winding things up; in others, the filing comes later. Different states require that different information be included in the articles of dissolution, but commonly-required items include:
• the name of the SMLLC
• the reason for filing the articles of dissolution (such as your vote or consent); and
• the effective date of dissolution if other than the filing date.
In most cases, you should be able to find an articles of dissolution form and filing instructions on your secretary of state's website. The fee for filing the articles of dissolution also should be listed on the website. Be aware that your business name will become available for use by others after you file for dissolution.
You may need to obtain tax clearance when you dissolve the business. Apart from filing articles of dissolution, some states require that you receive some form of clearance or approval from the department or agency that's responsible for collecting taxes (such as a Department of Revenue). In other cases, clearance may not be necessary, but you will be urged or required to inform the taxing department or agency of the dissolution after it has been processed by the secretary of state. You may also need to close out a state business tax account. You should check the website for the relevant state department or agency for details. In addition, some states will require you to notify the attorney general that you're closing your business. As with tax clearance, you should check the appropriate state website for details.
Following the formal decision to dissolve, your SMLLC continues to exist for the purpose of taking care of certain final matters that, collectively, are known as winding up the company. Under typical LLC laws, key winding up tasks include:
Regarding the last two listed items, discharging liabilities and distributing remaining assets, you're generally required to make payments in a particular order. First, you must pay, or make adequate provision to pay, creditors. (Note that it is particularly important that you pay all outstanding taxes.) Then, after those debts and any other liabilities are taken care of, you can distribute remaining assets to yourself.
One other key task is giving notice of your SMLLC's dissolution to creditors and other claimants. In most cases, giving notice is optional. However, doing so will help limit your liability and also make it safer for you to take for yourself any remaining assets. Laws vary by state, but in most cases, one way to give notice is by sending a written document directly to known claimants after dissolution. Generally, the written notice must:
In most states, you can also give notice to unknown (potential) claimants by publishing in a newspaper. As with sending direct notice to individual claimants, there usually are specific rules for giving notice through publication. In many states, claimants have three years after the date of newspaper publication to bring a claim; however, the length of time can vary between two years and five years depending on the state.
Finally, if your LLC is registered or qualified to do business in other states, 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 more detailed information on closing down an SMLLC in your particular state, check out How to Dissolve an LLC in Your State: A 50 State Guide.