By properly dissolving your limited liability company, you can ensure that creditors and state agencies are notified and your finances and professional reputation are protected. An LLC is a common business structure that combines the management flexibility of a partnership with the limited liability of a corporation. The operating agreement or articles of organization may provide when and how the LLC may be dissolved and how you should distribute its assets. Maryland law regulates how LLCs are dissolved if not spelled out in the operating agreement.
How to Dissolve
As a first step in dissolving your LLC, consult its articles of organization and operating agreement. Either of these documents may, but are not required to, contain provisions for when and how the business can be dissolved. For example, the operating agreement may include a particular date for dissolution or a specific number of member votes required to close the business. If not specified, you may close the business if there is unanimous consent by the members. Without unanimous consent, any individual member has the option to seek a judicial dissolution, where a court determines whether the LLC can reasonably operate and remain compliant with the articles of organization or operating agreement. An LLC can also be dissolved if the company has no members for a period of 90 days.
Read More: What Forms Are Needed to Dissolve an LLC?
Articles of Dissolution
To notify the state that you plan to dissolve the LLC, you must file Articles of Dissolution with the Maryland Department of Assessments and Taxation. This document must be filed after you have made the decision to dissolve the company, but before the LLC is officially terminated. The articles must include the name of the LLC, date the articles of organization were filed and a date for dissolution. After the articles of dissolution are filed, the members of the LLC continue to have authority to act on behalf of the company to wind up the affairs of the business.
Winding Up Business
After filing the Articles of Dissolution, the next step is to wind up the affairs of the business. This may be accomplished by any of the remaining LLC members. To wind up the business, create a plan to address any remaining debts and notify all existing creditors, lenders, business partners and customers. The last acts of the business may include paying final checks to employees and submitting final tax returns for the business.
Distributions of Assets
Any business assets remaining after all of the debts of the LLC are addressed should be distributed to the members of the LLC. Review the LLC's articles of organization and operating agreement to determine how the assets should be distributed. If the operating agreement is silent on the issue, you may distribute assets in proportion to the amount of each member's capital interest in the business.
Articles of Cancellation
Once the LLC members have addressed the debts of the business and distributed remaining assets, you must file Articles of Cancellation with the state Department of Assessments and Taxation. Before filing, send a notice of cancellation to all known creditors of the company. The Articles of Cancellation form must contain the name of the LLC, name and address of the registered agent, members responsible for winding up the affairs of the business and a statement that known creditors have been notified of dissolution. A member of the LLC and a registered agent must sign the articles. After sending in the form with the appropriate fee, the LLC either terminates immediately or on a future date specified in the articles.
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