LLC Reinstatement

Why Would an LLC Dissolve in Texas?

The decision to dissolve an LLC in Texas depends on the individual circumstances of the LLC, as there are various valid reasons for doing so. All LLCs must follow state laws and regulations specific to their state of formation. By complying with these requirements, the LLC can legally function as a separate entity.

While there are numerous factors that may lead to an LLC's dissolution, certain issues are more common than others. These include failing to file annual reports or pay fees on time, missing tax payments or underpaying taxes, neglecting to appoint or update a registered agent, operating without proper paperwork or licensing, and failing to comply with state regulations.
Each state has its own set of compliance regulations and requirements for LLCs. For instance, in Texas, most LLCs are required to pay a state franchise tax. Failure to do so can result in noncompliance issues, which can be detrimental to the LLC.

If you are unsure why your LLC was dissolved by the state, it is recommended that you contact the Secretary of State in Texas for further information. Understanding the reason behind the dissolution can help you determine whether to pursue reinstatement or start a new LLC.

Types of LLC Dissolvement

Various factors can contribute to the dissolution of an LLC, as previously mentioned. While non-payment of taxes may be a reason for some LLCs to dissolve, others may choose to dissolve for the purpose of altering their business structure to a corporation, which may prove advantageous to the members. Therefore, there are multiple types of dissolution, including judicial, administrative, and voluntary:

\- Judicial dissolution occurs when the courts order dissolution as a result of the LLC's failure to comply with state or federal laws. This is often initiated by former members of the LLC who wish to separate themselves from the business.

\- Administrative dissolution is brought forth by the Secretary of State due to the LLC's failure to comply with specific state laws or failure to file annual reports. The Secretary of State has a broad mandate, so dissolution can occur for various reasons at the discretion of the Secretary of State.

\- Voluntary dissolution happens when LLC members decide to close the business. This can occur due to specific dissolution triggers, such as the death of a member, or when members vote to dissolve the LLC.

Is it Better to Reinstate an LLC or Start a New One?

Deciding whether to reinstate your LLC or start a new one depends on your specific circumstances. Reinstating your LLC offers several benefits, such as a quicker process compared to starting from scratch, the ability to keep your company name and access to important historical records and paperwork. Additionally, you can retain existing customers and branding. Furthermore, you will be protected by limited liability from the date of dissolution until your LLC is reinstated, safeguarding your personal assets.

However, in some cases, starting a new LLC may be more advantageous. For instance, it provides a fresh start for your business, which could be beneficial if you want to target new markets or pursue new opportunities.