Not every limited li ability company lasts forever. Sometimes the business climate changes, and the venture is no longer profitable. Maybe you’ve done all you want with this business and are ready to move on to something new. Whatever the reason for closing up shop, you can’t just stop providing goods and services and walk away. You have to dissolve your LLC methodically, and there are specific steps for doing so. You’ll need to understand the basics of LLC dissolution and the process for dissolving an LLC in Oregon.
Dissolution is the official legal process of going out of business in the state where your LLC was organized and is registered. There are a number of reasons that this can come about, but the result of all of them is that your company no longer exists in the eyes of the State of Oregon.
Even if you are no longer actively trying to maintain or grow your LLC, it continues to exist as a legal entity until you dissolve it. You’re still responsible for filing required state reports, paying fees and taxes, and filing tax returns. LLC dissolution is the act that makes your business cease to exist. Once that happens, you are no longer accountable for reports, fees and taxes.
However, you have to follow all the required steps to make the dissolution legal and official. Simply filing Articles of Dissolution with the Oregon Secretary of State is not enough. You also must notify federal, state, and local agencies, notify creditors, and settle outstanding debts. Failure to follow the process can expose you to fines, penalties, and future liabilities.
Oregon LLC dissolution can be voluntary or involuntary. The two types of involuntary dissolution are administrative dissolution and judicial dissolution.
Administrative dissolution can be done by the Oregon Secretary of State if the LLC does not meet its obligations to the state. For example, an Oregon LLC will be administratively dissolved if its annual report is more than 45 days late. The LLC can request reinstatement, but there is no guarantee that its name will still be available. Failure to maintain a registered agent on file is another cause for administrative dissolution.
Judicial dissolution is a process by which a court orders that an LLC be dissolved. It’s sometimes called the corporate death penalty. Often this dissolution is a result of a petition from one or more members of a multi-member LLC.
Reasons for judicial dissolution include:
Voluntary dissolution takes place when the member or members shut down the business. Sometimes this happens when the LLC’s operating agreement states that the LLC will be dissolved upon certain triggering events, such as the death of a member.
In other cases, the members choose to dissolve the LLC. This may be because the business is no longer profitable and simply because they don’t want to run the company anymore. This dissolution requires a vote, and either a majority vote or unanimous votes may be required, depending on the operating agreement.
Here are the steps for voluntarily dissolving an Oregon LLC:
The operating agreement should lay out the process for voting on LLC dissolution. This would include whether the vote needs to be unanimous or whether a simple majority will suffice. It may or may not specify that the members need to meet physically rather than online. Any issues not covered in the operating agreement will be governed by Oregon law.
For a single member LLC, of course, no vote is required. The lone member can simply make the decision and initiate the process. A multi-member LLC will have to vote. Depending on the operating agreement, dissolution may require either a majority vote or a unanimous vote.
Your operating agreement should provide some details about the dissolution process, including:
As you will no longer be doing business, you must shut down your LLC in an orderly fashion. The actions you will have to take include:
Informing suppliers, customers, and other stakeholders that you will no longer be doing business.
Preparing employees for the shutdown, possibly including severance packages and letters of recommendation.
Informing your registered agent and canceling their service.
Winding down sales of goods and services.
Canceling your Oregon business licenses.
Preparing to close business bank accounts.
Selling leftover machinery, inventory, and other assets.
You must notify creditors and claimants about the dissolution and give them the opportunity to collect any money they are owed. All debts need to be settled before the business can be dissolved. While you personally are financially protected by your status as an LLC member, the LLC itself is not.
If there are pending lawsuits, these will have to be resolved before dissolution can take place.
Once all debts are settled, any remaining LLC assets need to be sold. Whatever money remains in the company’s coffers must be distributed to the members according to the dissolution terms laid out in the operating agreement.
The LLC must notify employment and tax agencies and file the required final documents:
A Department of Revenue Tax Clearance is not required for dissolution in Oregon. However, you will have to file your final state and local income tax returns. Remember that the assets you sell off generate taxable income for the LLC.
Follow the process specified by the IRS for reporting a business closure.
If you have an Oregon Business Identification Number (BIN) for payroll tax withholding, submit the Business Change in Status Form to report the closure to the Employment Department and Department of Revenue.
The Articles of Dissolution is the document by which you inform the Oregon Secretary of State that your LLC is officially going out of business. After the dissolution date you specify on this form, your LLC may no longer conduct business other than wind-down activities such as selling assets and distributing proceeds.
The Articles of Amendment/Dissolution form for LLC is a dual-purpose form. You need to fill out only the fields that pertain to dissolution. These include registry number, name of LLC, and the data the dissolution occurred. This cannot be a future date; it can be today’s date or a past date. There are lines for member signatures, printed names, and titles. You must also specify a contact person with their phone number. You must remit $100 with the form.
The form may be mailed to the Oregon Secretary of State Corporation Division at the address listed on the form or delivered in person. It may also be faxed to the listed number with a cover sheet. If you have questions, you can contact the Corporation Division of the Secretary of State at (503) 986-2200.
Filing this form does not terminate the authority of the registered agent; that must be done separately.
Processing time is about one week when the form is mailed or faxed. It is one day when the form is delivered in person. You may request a confirmation for $5, but, even without that, you can watch for the status change on the Oregon LLC website.
Ending the life of your LLC, even if it is the best course of action, can be a process with a lot of emotions attached. Actually making the decisions to cease business operations may be the hardest part of the process. Once you and your partners, if any, have done that, then it’s necessary to complete all the steps delineated here so that you and your LLC are protected from liability.
One last task you might consider: take a moment to celebrate what you have accomplished. You took a risk, you put your heart into building a business, and you gained some tremendous knowledge and experience. Most people never do that. The experience will help you succeed in whatever you move on to.
You might dissolve your LLC if there is poor cash flow or a lack of profits, if the business environment has changed, or if you and your fellow members have significant internal disagreements. On a more positive note, you might dissolve a successful LLC if you’re ready to retire or to move on to a new venture.
It costs $100 to dissolve your LLC in Oregon.
The form is available online, but you must mail it, fax it, or deliver it in person.
It takes about a week to process your Articles of Dissolution form, or a day if you deliver it in person. However, it can take several months for you to complete all the wind-up tasks.
If you don’t properly complete the process, you could face fines and other penalties. You may have to continue to pay for paperwork to be completed and filed.
You'll need to file articles of dissolution in each state, and you must satisfy each state’s requirements for informing tax and employment authorities.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.
Terry is a serial entrepreneur with over 25 years of experience building businesses across multiple industries – construction, real estate, e-commerce, hotelier, and now digital media. When not working, Terry likes to kick back and relax with family, explore Taoism’s mysteries, or savor the taste of fine Italian red wine.
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