Dissolving an LLC
ATTORNEYS IN DALLAS
Small or large, "winding up" your LLC business in Texas through dissolution in an involved process governed by the Business Organizations Code of Texas.
Dissolving an LLC
A skilled entrepreneur recognizes the importance of not only knowing when to embark on a new business venture but also when to bring an existing one to an end. A business owner may wish to terminate their enterprise in order to pursue fresh opportunities or avoid potential legal and financial complications. Regardless of the reason, owners of limited liability companies (LLCs) must comply with specific procedures before they can formally and appropriately dissolve their LLCs.
Get the Proper Approval
Before taking any further steps to voluntarily dissolve their business, LLC members must ensure that they have obtained the appropriate approval. One way to obtain approval for dissolving an LLC is if a dissolution event is specifically identified in the LLC's Certificate of Formation or Company Agreement. If such a dissolution event is not present, then all LLC members must agree to dissolve the LLC. In cases where the LLC does not have members, agreement from all managers is required for dissolution.
It is crucial to document the type of approval obtained from LLC members or managers before proceeding with the final steps of business dissolution. This documentation serves not only for filing dissolution paperwork with the state, but also to prevent confusion and potential legal disputes among members.
Stop Doing Business
Once the decision to dissolve the company has been made, all business matters need to stop. This includes making sale, bringing in new clients, signing contracts, etc. This is known as the "winding up process", the period of time businesses tie up loose ends in preparation of closing its doors. A company that aids in the winding up of an LLC may be involved in fulfilling outstanding contractual obligations, arranging for the transportation of business equipment from rented premises, or hiring an attorney to ensure proper completion of the dissolution and winding up process.
Notify Creditors and Claimants
Closing down an LLC that is struggling with legal or financial issues can help reduce possible harm. But, dissolving the LLC doesn't solve the existing financial and legal problems that the business has.
When dissolving an LLC, it's important to notify the people who have a claim against the business, so they have a chance to recover what they're owed before the LLC completely shuts down.
Sell and Distribute Business Assets
When a business is closing, it is important for the owners to take care of their responsibilities to creditors and owners. To fulfill these obligations, they can sell off their assets.
Before closing the business, LLC members should create a list of all the assets they have. They can then sell the assets and distribute the proceeds among the members. By doing this properly, the members can quickly pay off any outstanding debts and increase the amount of money each member receives.
Handle Any Other Outstanding Matters
Every LLC is unique, and it's probable that they will have different requirements to wind up compared to other LLCs. It is crucial for LLC members to seek advice from their attorney to identify any problems that require attention before dissolving the LLC. As not taking care of all pending concerns may lead to unwanted legal and financial troubles for the members.
File a Certificate of Termination
To dissolve an LLC, the final step is to file a Certificate of Termination with the Secretary of State. This form requires the LLC to provide various information, such as the official business name, business structure, formation date, file number, governing individuals, and an explanation for dissolving. Additionally, the LLC must include a statement that it complied with Texas law's winding up requirements, a Certificate of Account Status, the effective date of filing, and a signature from an authorized party. A filing fee must also be paid when submitting this form.
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