If you formed a Connecticut Limited Liability Company (LLC) and things aren’t panning out, or a pivot event occurred, does it make sense to spend the time and energy dissolving the entity? Actually, the benefits of LLC dissolution far outweigh the feeling of immediate gratification you might experience by just walking away.
Although the ramifications of not dissolving your LLC might not be apparent right now, the entity is open until it has been officially closed. Given that today’s business landscape may hold more than a few surprises, knowing how to dissolve an LLC in Connecticut can help you successfully complete an exit strategy and embrace new opportunities.
Professionals have wide-reaching reasons why they decide to close a Connecticut LLC. Sometimes, the revenue isn’t enough to make the effort worthwhile. In other cases, someone key to the success of the operation passes away. And it’s not unusual to form an LLC and never actually start doing business.
Putting a Connecticut business entity to bed might not be quite as simple as clicking an app on your smartphone. After all, just as launching the venture required procedural phases and considerable due diligence. Similarly, LLC dissolution also calls for a concise step-by-step process. For instance, you will likely need to conduct an audit of your assets and liabilities, assess ongoing contracts, and a variety of other company-related items. At the end of the day, the Connecticut Secretary of State provides a relatively straightforward process.
One of the reasons otherwise intelligent people fail to officially dissolve a Connecticut LLC is due to the fact they don’t understand the legalities. By resolving critical company issues and filing the appropriate paperwork with the Connecticut Secretary of State, you will no longer incur debts or leave yourself open to civil liability.
If you simply walked away from an ongoing month-to-month commercial lease, the landlord would probably continue billing your organization. The property owner may have a right to go after any assets the company holds by securing a mechanical lien. Legal LLC dissolution prevents this and other stressful and costly entanglements.
There are three basic types of LLC dissolution in Connecticut — judicial, administrative, and voluntary. The first two are considered involuntary dissolution and often prove problematic for LLC owners and stakeholders. Voluntary dissolution is the best course of action when shutting down an organization because it resolves legal and financial issues.
When an LLC fails to file an annual report or other mandated documents, the Connecticut Secretary of State performs an administrative dissolution. In Connecticut, administrative dissolution is commonly called “forfeiture.” That term is spot on because the entity has effectively forfeited its right to conduct business, use the enterprise or doing business as (DBA) name, and the business entity name becomes available for someone else to secure. The Connecticut Secretary of State typically posts business forfeitures on its platform for 60 days.
In this type of involuntary LLC dissolution, a judge can decree that an organization acted in a fraudulent, illegal, or oppressive fashion. The court action may be the result of a civil lawsuit being brought or a state attorney general successfully gaining a criminal judgment against the company or its members. It’s also possible for Connecticut LLC owners to ask a judge to resolve business differences. In rare cases, the court finds that irreconcilable differences exist, and the only remedy is a judicial dissolution.
Unlike the previous two types of LLC dissolution, following the appropriate steps gives owners control over the process. Voluntarily dissolving an LLC in Connecticut avoids administrative hassles, going to court, or dealing with the fallout from the decisions of officials. You’ll discover that by completing the process the right way and acquiring a Connecticut Certificate of Dissolution, you’ll walk away with peace of mind.
The Connecticut Secretary of State provides a relatively succinct business dissolution that most people can negotiate. You or an authorized proxy can file the required documents. Once the information has been received, processed and approved, you will receive an official Certificate of Dissolution. It may seem odd, but the internal steps are far more involved and time-consuming than dealing with the bureaucracy.
Review the organization’s operating agreement and follow the business dissolution procedures. This may involve gaining a quorum of eligible voters in a multi-member LLC. Typically, a majority carries the day, depending on how the closure vote is determined. In the case of a single-member LLC, the owner can move forward at will.
In a single-member LLC, the sole owner gets to make all the decisions and enjoy any profits after debts are resolved. A multi-member Connecticut LLC calls for a thorough and careful reading of the operating agreement. A thoughtful document outlines how assets are to be distributed and the process for closing the entity. Handling internal decisions and processes is usually more labor-intensive in a multi-member LLC or navigating a state bureaucracy.
The business dissolution rules outlined in the operating agreement must be followed to the latter. When decisions are made that stray from the binding, agreed-upon process of dividing assets, paying down debts, or other items, disgruntled stakeholders could have grounds for legal action after the LLC has been shuttered. Remember, your LLC operating agreement is not a set of guidelines. They are stringent, must-follow business rules that carry the force of law.
If you employ one or more people, the state requires employers to notify the Connecticut Paid Leave Authority regarding your business closure. You can visit the CT Paid Leave portal for detailed information and compliance.
The idea of “winding up” business affairs may seem counterintuitive. Most people think about “winding down” business matters when dissolving an LLC. Winding up refers to notifying subcontractors, vendors, landlords, and government agencies about your intention to shut down the entity. If you have 100 or more employees, the Worker Adjustment and Retraining Notification (WARN) Act tasks employers with notifying employees at least 60 days prior to closing down.
It’s essential to resolve any debts or outstanding balances before you file articles of dissolution. Creditors could take legal action against you personally if owners divided up assets and cash without first paying off debts.
The Connecticut Secretary of State mandates that a business close out its unemployment tax account and reconcile with the state’s Department of Revenue Services. The state requires LLCs to leave at least enough cash in business bank accounts to cover any outstanding tax debts. It’s also important to note that federal taxes cannot go unpaid.
The Connecticut Secretary of State’s website makes filing a statement of dissolution relatively simple. An authorized LLC member can download the form and enter essential information, which includes the following:
There is no charge for LLC dissolution in Connecticut. You can mail the completed form to:
Commercial Recording Division
Connecticut Secretary of State
P.O. Box 150470
Hartford, CT 06115-0470
Limited Liability Company owners can also log into CT.gov and use their business services account to close the operation. The platform estimates the digital filing process takes about 5 minutes if you have the necessary information on hand.
The importance of not leaving loose ends dangling when you dissolve an LLC in Connecticut cannot be understated. Failing to resolve issues with creditors, owing taxes, and not giving employees fair warning are things that can come back to haunt you. By following the step-by-step process regarding how to dissolve an LLC in Connecticut, you will be able to focus on your next financial opportunity without worrying about the last.
People decide to move on from an LLC for wide-reaching reasons. These may involve retirement, lifestyle changes, or if they find the cost of doing business in Connecticut is too high. Regardless of why you made the unique and personal decision to close your LLC, following the voluntary dissolution process prevents financial and legal dilemmas from rearing their ugly head down the road.
Connecticut does not charge a filing fee to file articles of dissolution. The process can be completed online using your CT business access account. The form can be downloaded, completed and mailed to the Commercial Recording Division.
The short answer is: Yes. By logging into your CT business account on the Connecticut Secretary of State platform, the process can be completed in about 5 minutes if you have the necessary information available.
The digital filing process takes about five minutes, and the form may be just as fast. The time-consuming part is handling business affairs, such as closing tax accounts, negotiating with creditors, and notifying vendors and employees, among others.
If you do not voluntarily dissolve your LLC, the Connecticut Secretary of State will perform an involuntary dissolution called “forfeiture.” The forfeiture process is triggered when an LLC doesn’t file an on-time annual report. It’s prudent to follow the step-by-step voluntary LLC dissolution procedures and avoid problems.
Franchises and operations that register entities in more than one state must file for a Certificate of Dissolution or Certificate of Termination in each municipality. Business entities are largely authorized and overseen by individual state governments and regulations.
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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