If you formed an Arkansas Limited Liability Company (LLC) and are not using it or feel frustrated the revenue isn’t covering the bills, dissolving your LLC may seem like a waste of time. Why not just leave it in limbo or shutter activities and walk away? After all, other opportunities await.
Truth be told, failing to follow through with the formal LLC dissolution process in Arkansas can turn into a financial and personal nightmare. Leaving the entity on the Arkansas Secretary of State business database means it remains a legally viable enterprise. As an owner, you could be held financially responsible for paying Arkansas taxes, fees, penalties, and filing annual reports. On the non-governmental side, you could be exposed to corporate identity theft and creditors hounding you in court. As the adage goes, inaction is an action, and it’s essential to put the entity to bed. This is how to dissolve an LLC in Arkansas.
Business dissolution is not as easy as flipping off a light switch. Before you begin winding down your affairs, you’ll need to conduct a thorough audit of the operation. These efforts typically involve balancing financial accounts, recording transactions, resolving business agreements, and compiling these and other documents in a safe and secure manner.
From a legal perspective, dissolving your Arkansas LLC puts creditors on notice that you will no longer be incurring debts. For instance, a landlord can no longer anticipate a rent check on a month-to-month lease basis. It’s natural to contact the commercial property owner and give the individual notification. However, anything that isn’t legally binding outside the corporate veil comes to a close once the LLC dissolution has been completed.
If this is your first LLC dissolution, it may seem unusual to learn there is more than one way to close out an LLC in Arkansas. In fact, the Arkansas Secretary of State recognizes three distinct types of LLC closures — judicial, administrative, and voluntary.
An administrative LLC dissolution happens when the Arkansas Secretary of State exerts authority to strip an entity’s legal standing. This includes its right to operate in the Natural State, its powers, and any authority it holds. An administrative dissolution may be the result of failing to pay certain taxes or fees to the state. One of the common reasons for this involuntary dissolution is not paying the Arkansas franchise tax and filing the required annual report.
Another type of involuntary LLC dissolution, this process involves court action. A stakeholder in an Arkansas LLC, state official, or other party with standing can ask the courts to dissolve an LLC based on a variety of reasons. These often include mismanagement, breach of fiduciary duty, fraud, or two or more owners cannot agree to disagree and amicably resolve internal disputes. A judge may decide on a fair and equitable resolution. In cases where the LLC cannot reasonably continue, the court invokes this involuntary business dissolution alternative.
Of the three types of entity closures, voluntary dissolution allows owners and operators to handle the process on their own terms and timetable. Members of an Arkansas LLC may include a clause that triggers business dissolution. In most cases, people choose to dissolve an LLC because it is no longer active, revenue has ticked down, or a better opportunity comes along. Regardless of why you decided to move forward with LLC dissolution, it’s crucial to complete the entire process without exception.
Voluntary dissolution calls for a member vote that follows the guidelines set forth in the operating agreement or bylaws. If a majority of the owners or investors agree it’s in their best interest to put the entity to bed, record the decision. Maintain a copy of the decision with your official paperwork.
The LLC dissolution depends, amongst other things, on the type of LLC you own. While multi-member LLC dissolution requires a vote and a majority to carry the day, an entity owned by one person does not. Single-member LLCs are advantageous because they provide tax advantages, such as revenue flowing through to individual income tax filings. Owner-operators also gravitate toward forming an LLC in Arkansas because of the flexibility and business agility they offer. That premise holds true when dissolving the LLC as well. However, a multi-member LLC must follow the procedures established in the operating agreement to lawfully close the entity.
Having followed the voting procedures outlined in the operating agreement, your multi-member LLC is tasked with circling back and adhering to a wide range of other mandates. If the LLC operating agreement has been well-crafted, it should provide definition governing the distribution of assets, paying off debts, notifying vendors about contract cancelations, and closing out leases. Following these steps, in accordance with Arkansas statutes, can prevent a dissatisfied individual from bringing a civil lawsuit against the LLC and you personally.
The term “winding up” business affairs involves notifying people and other entities about your intention to dissolve the business. A short list usually includes your Arkansas registered agent, suppliers, subcontractors, licensing and permitting agencies, financial institutions, clients, and employees. Following through on the winding up process gives other organizations and workers fair warning. This ethical practice also protects your reputation for future endeavors.
It’s important to keep in mind that LLC dissolution is not akin to a bankruptcy filing. Business owners cannot distribute cash and assets and stiff creditors. Failing to lawfully resolve business debts could result in creditors filing a fraud claim against the owner or members after the entity has been shuttered. That’s why it’s critical to pay off any loans, credit card balances, and peripheral debt before you file articles of dissolution with the state.
State and federal taxes cannot go unpaid, whether that means funneling company revenue to cover them or reaching into your own pocket. In terms of the federal IRS, check the “final return” box located near the top of the first page. If someone handles tax filings for your LLC, remind them this will be your last return.
The Arkansas Secretary of State’s website does not make filing a statement of dissolution overly complicated. An authorized LLC member can visit the platform and select an online filing or download a PDF. The Statement of Dissolution form asks for the following.
The filing fee for mailed-in forms runs about $50. If you secure a filing number, the state charges $45 to process the form online.
It’s crucial not to leave any loose ends hanging when you dissolve an LLC. If your LLC conducted business across state lines, you may need to resolve matters outside the Arkansas jurisdiction. Once you have completed the process, the good news is that you are free to take the next logical step in your business endeavors. As the saying goes, when one door closes, another door opens.
People have plenty of unique and personal reasons to dissolve an LLC. It may be a matter of lifestyle, retirement, cost of doing business, or another unexpected life change that prompts you to file for LLC dissolution. The benefits of closing out an entity cleanly include insulation from personal liability, good standing in the business community, and a sense of closure.
Dissolving and LLC in Arkansas is relatively inexpensive. You can fill out a digital form and file the Statement of Dissolution online for $45. If you choose to download the form and use snail mail, the fee is $50.
The short answer is: Yes. An authorized person can file online after following the procedure established in your LLC’s operating agreement. Solo owners need only fill out the form on the Arkansas Secretary of State platform and pay a $45 fee.
There is no specific or even average timetable for dissolving an LLC in Arkansas. Although the filing process can be concluded in under a half-hour, other duties must be handled that take much longer. For instance, you may need to negotiate with creditors, notify vendors and a landlord about your LLC dissolution, close bank accounts, inform clients, and many other obligations. The length of time is largely determined by how involved issues outside the actual filing process take to complete.
If you fail to dissolve your Arkansas LLC, you could open yourself up to civil litigation. Disgruntled creditors, business agreement partners, employees, and other stakeholders may have legal grounds for civil action against you personally. That’s largely because the corporate veil no longer applies. It’s usually best to take the time to voluntarily dissolve an Arkansas LLC and not have to worry about unresolved issues.
If you have a franchise or organization registered in multiple states, you will need to go through the LLC dissolution process in each one. Arkansas statutes do not necessarily apply in other jurisdictions. If it’s any consolation, the LLC dissolution process is similar in all 50 states.
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. It also does not indicate any affiliation between Tailor Brands and any other brands, services or logos.
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