Closing your Nebraska 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 Nebraska. 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 failure to pay taxes or file biennial reports, 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 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.
You should also be aware that, regardless of whether your operating agreement contains any dissolution provisions, Nebraska’s LLC Act provides an alternative method to dissolve an LLC: obtaining consent of all LLC members. Whether you choose to dissolve your LLC based on rules in your operating agreement or unanimous member consent, make sure to record the decision to approve the dissolution in the official minutes of the dissolution meeting or on a written consent form.
After dissolution by vote or by unanimous consent, 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 Nebraska’s LLC Act, required winding up tasks include:
In addition, winding up your LLC may also involve such matters as prosecuting and defending lawsuits, transferring company property, mediating or arbitrating disputes, and delivering a statement of termination to the Secretary of State. (A statement of termination is different from the required statement of dissolution; you may want to check with a business lawyer to determine if a statement of termination is appropriate in your case.)
Under Nebraska’s LLC Act, available assets first should be used to pay LLC creditors (including LLC members who are creditors). Keep in mind that it is particularly important to pay any outstanding taxes. After paying creditors, any surplus assets should be distributed according to your operating agreement. Unless your operating agreement states otherwise, members should first be reimbursed for any previously unreturned contributions to the LLC, and then, with certain exceptions, in equal shares among members and dissociated members.
The statement of dissolution that you are required to file as part of winding up your company is a very simple document. According to statute, it must contain the name of your LLC and a statement that the company is dissolved. However, a statement of dissolution form available from the Secretary of State also includes a statement that “The company shall discharge the company’s debts, obligations, or other liabilities, settle and close the company’s activities, and marshal and distribute the assets of the company” and a space to provide an effective date if other than the filing date.
There is a $15 fee to file the statement of dissolution. It should be processed within 2-3 days.
One other key task, generally considered part of winding up, is giving notice of your LLC’s dissolution to creditors and other claimants. 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 Nebraska 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 a notice for three successive weeks in a newspaper. As with sending written notice directly to individual claimants, there are specific rules for giving notice through publication, including specific items that the published notice must contain. 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.
Unlike some other states, Nebraska does not require you to obtain tax clearance from the Department of Revenue (DOR) in order to dissolve your LLC. However, you may need to file the DOR’s Form 22 (Change Request) to cancel corporation income tax, partnership income tax, or other business-related taxes. For more details, check the DOR website.
For federal tax purposes, make sure to check the “final return” box on your IRS Form 1065 when you file your final federal tax return.
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 Secretary of State website.
For information on dissolving and winding up LLCs formed in other states, check Nolo’s 50-state series on dissolving LLCs.
Note: 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.