When you decided to incorporate your business as a limited liability company, you were likely reassured by the protections that this designation provides. Unlike various alternative business structures, limited liability company structures provide their owners with legal protections which insulate their personal assets from business-related liability. However, certain protections only extend so far. As a result, if your business is no longer operational, it is important to formally dissolve an LLC.
Why Is Dissolution Necessary?
Formally dissolving an LLC will allow you to alert both creditors and the state that your business is no longer operational. Taking this step as soon as possible will help to limit any liabilities that your business may remain vulnerable to. For example, failure to formally dissolve will allow the state and the Internal Revenue Service to keep taxing your company, even though it is no longer employing any workers or generating any profit. In addition, until your business is dissolved, your company may remain obligated to file certain reports on an annual basis and pay certain fees to various agencies.
Creditors also need to be notified that your business is legally shut down. Only after this notice has been served are creditors obligated to stop adding certain kinds of debts to your company’s account. This is a particularly pressing benefit in dissolution of a corporation, as “open” businesses may continue to be slapped with fees, fines and lawsuits related to unpaid debts. Although formal dissolution of a corporation does not insulate businesses from every liability, it certainly helps to minimize them.
Sometimes formal dissolution of a corporation involves a hefty amount of legal paperwork and little else. Your legal representation will be able to help you navigate that aspect of the dissolution process. However, certain LLC structures require additional steps before a company can be formally dissolved. For example, most situations call for a formal vote of members before a company can be legally shut down. The procedure for such a vote may be outlined in your LLC’s operating agreement. But if not, you may benefit from asking your legal representation about any formal LLC dissolution voting procedures mandated by your company’s home state. Failure to take this step when necessary could significantly impact the formalization of your dissolution process.
Please also note that creditors, the state, tax-related authorities, licensing agencies and other entities must generally be notified of your company’s dissolution in specific ways and within a specific period of time. You must also go through similar processes with any other states your business is registered in. Failure to follow strict guidelines may affect your company’s potential liabilities.
Let Us Do the Heavy Lifting
If you need to dissolve an LLC, you need not feel overwhelmed about the prospect. The team at LawTrades is highly experienced, efficient and effective in matters involving dissolution. Our team handles all the details so that you don’t have to. Please consider contacting us today to discuss your legal options. As long as your business remains legally “open” it remains vulnerable to certain financial and practical obligations, as well as various potential liabilities.