Closing your Wisconsin 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 Wisconsin. Officially ending its existence as a state-registered business entity and, by extension, terminating any tax or fee obligations 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 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 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, Wisconsin's LLC Act allows for an alternative method to voluntarily dissolve an LLC: the written consent of all LLC members.
For either approach to dissolution of your LLC—relying on rules in the operating agreement or obtaining 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 are known as winding up the company. You will probably designate one or more LLC members or managers to handle the winding up.
Under Wisconsin's LLC Act, key 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. You first 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. Then, unless your operating agreement provides otherwise, you must make any required distributions to LLC members unrelated to the dissolution. Examples include "interim" distributions that may have been previously approved by LLC members or managers, or distributions due to dissociated members of 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 proportion to their respective rights to share in distributions from the LLC before dissolution.
Also, note that dissolution does not prevent your LLC from suing or being sued.
After dissolving your LLC, you should files articles of dissolution with the Division of Corporate & Consumer Services of the Department of Financial Institutions ("WDFI"). Unlike many other states, Wisconsin does not require you to file this type of final document, instead stating that an LLC may file. However, it is generally advisable to files the articles of dissolution. (If you have specific questions about whether to file, you should contact a local attorney.)
To complete the articles of dissolution, you need to provide:
The WDFI requires that you submit an original and one exact copy of the articles. There is a $20 file fee. Filings usually take about five business days to process. You can get expedited processing for an additional fee. An articles of dissolution form is available for download from the WDFI website.
Be aware that your business name will become available for use by others after dissolution.
One other key task is giving notice to creditors and other claimants of your LLCs 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 Wisconsin law, one way to give notice is by sending a written document directly to known claimants after the effective date of your articles of dissolution. Proper written notice must include:
You also may give notice regarding unknown or contingent claims by publishing in a newspaper. As with sending direct notice to individual claimants, there are specific rules for giving notice through publication, such as the number of times you must publish and what information the notice must contain. Generally speaking, claimants have two 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.
Wisconsin does not require that you obtain tax clearance before dissolving your LLC. However, the Department of Revenue (DOR) does advise that you should notify them if you close your business by phone, e-mail, or by completing the form called "Request to Close Account in My Tax Account."
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.
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 WDFI 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.