How to Transfer Ownership of an LLC

By Gary MacFadden
All members of a Limited Liability Corporation must agree to dissolve the entity.

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Each year, thousands of businesses structured as Limited Liability Corporations (LLCs) decide to end operation for one reason or another. It is important to formally dissolve a LLC. According to the website MyLLC.com, "If you fail to do so, the state could continue to assess fees on your business entity, and in many cases, the principals of the entity could be personally responsible for fees or taxes – or held liable for unforeseen actions against the company.” The steps to dissolve an LLC are not difficult, but you do need to follow a procedure that is outlined by the secretary of state’s office in your state.

The procedure to dissolve an LLC

Reach an agreement to dissolve with the owners or members of the LLC. All owners must grant approval before the dissolution can move forward. Formally document the decision to dissolve and put the members’ approval in writing, along with their signatures. This document must clearly show the intent of the member or members to terminate the relationship with the LLC.

Contact your secretary of state’s office or other state agency where your LLC paperwork is filed and ask for the procedure for filing an agreement of dissolution. In some states, the dissolution paperwork is filed before creditors of the LLC are contacted; in other states, the creditors must be contacted and claims processed before filing the dissolution paperwork.

Prepare Internal Revenue Service (IRS) Form 966, Corporate Dissolution and Liquidation. Review the form with a qualified CPA or attorney before filing with the IRS, as it could have tax ramifications for the members of the LLC. Some states require that all state and federal taxes owed by an LLC be paid before dissolution paperwork can be filed.

List and value the assets of the LLC prior to the dissolution. Include real estate, office equipment and furniture, bank balances and any investments held in the name of the LLC (not including personal investments of the LLC members). As assets are sold, keep careful track of the sale prices and the original cost basis in each item. This ledger will be used in determining how creditors‘ claims (if any) will be handled, as well as for completing necessary state and federal tax forms. Any remaining proceeds from the sale of assets will be distributed to the members once the LLC is dissolved.

Advise any creditors that the LLC has filed a statement of intent to dissolve. Include a mailing address and e-mail address where creditors can send their claims, as well as a phone number for questions. List the information that should be included with any claim, and set a deadline for receiving claims. Some states may require a notice in a local or regional newspaper that your LLC is dissolving in an attempt to locate additional creditors who hold claims against your LLC. Pay any claims received by vendors or other creditors with proceeds from the sale of the LLC’s assets.

Once claims have been paid or arrangements for payment have been made, file the Certificate of Termination with the secretary of state’s office along with any signatures or other documents required by your state. The dissolution agreement will include the company name and the names of its members, a reason the LLC is being dissolved, the date the dissolution will become effective, a list of any unpaid fees or taxes and a list of any pending lawsuits or court judgments.

About the Author

Based in central Oregon, Gary MacFadden started writing in 1972 as a "stringer" for several Montana newspapers. He has written six books about bicycle touring and has been published in "Outside," "Wilderness Camping," "Adventure Cyclist" and other publications. MacFadden holds a Bachelor of Arts in journalism from the University of Montana.

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