A limited liability company (“LLC”) is just one type of organization that a person can form to start their business. For example, a person may choose to start a corporation or a limited partnership instead.
There are many benefits to organizing your company as an LLC. One of the primary advantages associated with LLCs is that its members can only be held liable for certain debts or conduct related to the business, but they generally cannot be held personally liable unlike the members of a general partnership.
When it comes to the dissolution process for an LLC, there are several ways for you to go about completing this stage.
What is an Easy Way to Dissolve a Limited Liability Company?
As mentioned above, there are many ways in which a member of an LLC can start the dissolution process. The easiest way for a person to dissolve an LLC is by will, e.g., voluntarily giving up their rights as a member.
This means that the member will no longer be able to exercise their rights for choices that the LLC makes, governance duties, or management. This person will also not be able to receive any financial or managerial benefits from the LLC.
These sorts of actions will clearly show that individual’s intent to terminate their relationship with the LLC and will change the nature of their relationship with that business.
It is important to note that this will not dissolve the LLC in its entirety. Instead, this method will only be used when a member no longer wants to be a part of the LLC. The LLC can continue to exist, but that particular individual will have no say over anything that happens in the company nor will they be associated with it anymore.
In addition, when a member only sells or assigns their interest in the LLC, then their actions will not be considered a dissolution by will. Instead, that member must essentially resign themselves from all connections to the LLC.
Generally speaking, most state statutes do not give a person a default right to recover their investments and contributions to the LLC, unless they contracted for such rights either when the LLC was formed or when they joined as a member of the LLC.
What are Some Other Ways You Can Dissolve a Limited Liability Company?
There are also other ways to dissolve the LLC that result in the termination of the entire company, as opposed to just one member of the LLC. This can happen when every single member of the LLC voluntarily chooses to end their relationship with the company. This is one of the most common methods used when dissolving an LLC.
In certain cases, if an important member of the LLC dies, withdraws from the company by will, or terminates their relationship with the LLC for some other reason, then the LLC may simply dissolve on its own if there is no one else who is capable or willing to run that business.
Lastly, all members may also agree to dissolve the LLC by filing the required paperwork with the same state agency that originally formed the company.
What are Some Things that are Included in the Filing to Dissolve an LLC?
Every state has its own laws when it comes to setting up or dissolving a business. Although this means that each state’s process will differ, nearly all states require the following information in order to properly dissolve an LLC. This includes:
- The name of the company;
- The names of all of its members;
- The date of filing;
- The reason or reasons for dissolving the LLC;
- The date that the dissolution becomes effective; and
- Any information regarding lawsuits that are pending or if there are any unpaid taxes owed by the company.
What Happens to the Assets of an LLC When It Dissolves?
The assets of a dissolved LLC may be distributed to its owners in any manner that either the terms of its original operating agreement provides for, or in any way that the members see fit.
It is extremely rare for members to ask a judge to distribute the company’s assets because the members usually already know how much they have invested into the LLC. Additionally, dissolving an LLC tends to be a planned event so the members have already anticipated what they will need to do.
However, before anything can be distributed to its owners or members, the LLC must first use any additional funds to pay off the company’s debts owed (if any), taxes, and creditors. Oftentimes, the law will not recognize the dissolution until such parties are paid out.
Should I Hire an Attorney to Help with the Dissolution of My LLC?
Dissolving a company can be an upsetting and emotional event. This is especially true if your relationship with your partners have soured. Aside from the personal aspect, the various laws that apply to businesses can be quite complex to handle without the assistance of an attorney.
Therefore, if you are thinking about leaving an LLC or looking to dissolve an LLC with other members, then you should consult with a local business attorney to make the process as smooth and painless as possible.