Closing your 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.
Your LLC is registered with the State of 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 pay an annual registration fee, 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 formational documents—the articles of organization and operating agreement. In most cases, one of those two documents 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.
Also, regardless of whether your articles of organization or operating agreement contain any dissolution provisions, Virginia's LLC Act allows for an alternative method to voluntarily dissolve an LLC: unanimous written consent of the 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 resolution 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.
Compared to many other states, Virginia's LLC Act provides minimal information about tasks included in winding up, and focuses mainly on two matters:
You are required to distribute LLC assets in a particular order. You first must pay creditors, including LLC members who are creditors, to the extent permitted by law. Note that it is particularly important that you pay all outstanding taxes. Then, unless your formational documents provide otherwise, you must make any required "interim" distributions to current and former LLC members. (For example, a distribution might be due to a member because he or she previously withdrew from the LLC). Finally, if any assets remain, and unless your operating agreement provides otherwise, you should (a) return to members any contributions they made to the LLC; and then (b) make distributions to members in the proportions in which they share in distributions.
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 Virginia 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 and winding up your LLC, you must file articles of cancellation with the State Corporation Commission ("SCC"). To complete the articles of cancellation, you need to provide:
There is a $25 fee to file the articles. Your filing usually will be processed within 1-2 weeks. Expedited processing is available for an additional fee. An articles of cancellation form is available for download from the SCC website.
Be aware that your business name will become available for use by others after your articles of cancellation are processed.
Virginia 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 SCC 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.