Closing your Alaska 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 State of Alaska. 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 a court decree, or for administrative reasons such as failing to file biennial reports or pay fees or penalties, 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 operating agreement. In most cases, it will contain a section with rules on 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 articles of organization or operating agreement contain any dissolution provisions, Alaska’s LLC Act allows for an alternative method to voluntarily dissolve an LLC: written consent of all LLC members.
For either approach to dissolution of your LLC—relying on rules in formational documents or unanimous written 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 for the purpose of taking care of certain final matters that are known as “winding up” the company. You will probably designate one or more LLC members or managers to handle the winding up.
Under Alaska’s LLC Act, winding up tasks include:
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, including, to the extent permitted by law, LLC members who are creditors. Note that it is particularly important that you pay all outstanding taxes. Next, unless otherwise provided in your operating agreement, you must pay current and former members any required distributions independent of dissolution, such as previously-approved interim distributions. Finally, unless otherwise provided in your operating agreement, you should distribute any remaining assets to current and former members (a) to return their contributions to the company; and then (b) in proportion to the their respective rights to share in distributions from the company before dissolution.
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 Alaska 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:
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 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 have the option to files articles of dissolution with the Division of Corporations, Business and Professional Licensing (“DCBPL”). Alaska does not require you to file this type of final document, instead stating that an LLC “may” file articles of dissolution. However, it is generally advisable to officially dissolve your business via articles of dissolution. (If you have specific questions about whether to file, you should contact an attorney.)
Articles of dissolution must contain basic information about your dissolved LLC, including:
The DCBPL also asks you to provide your LLC’s Alaska Entity Number. The articles must be signed by a manager, member, or other authorized individual. There is a $25 fee to file the articles. Standard processing time is 10-15 business days, not counting time for mailing back a certified copy. An articles of dissolution form is available for download from the DCBPL website.
Be aware that your business name will become available for use by others after you have dissolved your LLC.
Alaska 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 DCBPL 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.