Have you formed a Limited Liability Company / LLC, and revenue has stagnated? Has the organization fulfilled its purpose? Are you ready to retire or grab another lucrative opportunity, and you need to dissolve your LLC in Washington, D.C.? Those are common reasons why business professionals decide to close out an entity. As one might expect in the nation’s capital, LLC dissolution can prove challenging.
If this is your first time navigating business dissolution in D.C., following specific procedures can reduce some of the stress and anxiety of chasing down documents, filling out forms, and meeting voluntary dissolution requirements. The following step-by-step instructions and information will illustrate how to dissolve an LLC in Washington, D.C., efficiently.
Entrepreneurs and innovative thinkers sometimes bypass the portion of their operating agreement that covers how to dissolve your LLC. A certain level of confidence, coupled with not wanting to invite negative vibes, prompts people to take a success-only stance. While admiral, there are wide-reaching reasons to outline precisely prepare for and file articles of dissolution in D.C.
If your operating agreement does include clauses regarding these procedures, read and follow them to the letter. If not, the basics of LLC dissolution will be covered in this step-by-step guidance.
It’s essential to resist any notions of simply walking away and leaving the business entity unused. The LLC dissolution process is a legal necessity that helps prevent unwarranted expenses and civil litigation. Some of the worst-case scenarios that happen to professionals who fail to put an entity to bed include fraudsters purchasing merchandise under the LLC’s name, landlords continuing to bill the organization, and the District of Columbia leveling late fees and penalties for not filing annual reports.
To some degree, business dissolution may be as crucial as carrying liability insurance. Without either, you are taking unnecessary professional and personal risks. That being said, knowing the types and how to dissolve an LLC helps streamline the process so you can sleep easy after it’s completed.
There are three types of LLC dissolution — judicial, administrative, and voluntary. The latter is the worry-free way to close an organization and move on to new opportunities. The first two might also be called involuntary business dissolution.
An administrative dissolution involves an official eliminating the rights and privileges of an organization to conduct business. Each state has varying reasons why its Secretary of State or another official can take this action. Washington, D.C., operates differently. According to the Code of the District of Columbia, the Mayor can dissolve a domestic entity based on an LLC not doing the following.
An enterprise has 60 days from the time it is served notice to cure the reason(s) why it faces administrative dissolution. Failing to resolve the complaint may result in the Mayor signing a statement of dissolution.
Judicial dissolution is another involuntary type of closure that is issued by the courts. Under the Code of the District of Columbia, a judge can revoke an LLC if the Attorney General brings an action and demonstrates one of the following.
It’s also possible for stakeholders to ask the court to dissolve the LLC, based on the following.
Judicial dissolution is clearly a hard road that business professionals generally prefer to avoid traveling. Fortunately, voluntary dissolution is not nearly as fraught with problems.
Pursuing a voluntary LLC dissolution in Washington, D.C., allows owners and operators to resolve business matters at their own pace and on their terms. The sole owner or members can decide to shutter the operation after it fulfills its purpose, revenue has declined or simply retire. The reasons to voluntarily close out an LLC vary substantially.
A thorough and diligent LLC dissolution helps hard-working professionals avoid unwelcome surprises. But, truth be told, few first-time entrepreneurs know how to dissolve an LLC in D.C. These are the steps you need to take to secure a certificate of dissolution.
Your operating agreement may provide guidelines about voting to dissolve the LLC. In many cases, a quorum must be assembled — in person or through video conference — and a simple majority usually carries the day. It’s essential to record, document, and file a report that details the event and outcome.
The critical difference between single- and multi-member LLCs is that sole owners do not have to ask permission. Owner-operators typically select the LLC entity type instead of a sole proprietorship because it offers better liability protection, tax benefits, and agility.
The dissolution clause in your operating agreement is not a loose guideline. To legally dissolve your LLC, you will need to familiarize yourself with the language. A smartly written agreement outlines the process of debt resolution, terminating contracts, divvying up assets, and putting the LLC to bed. The instructions established in the document must be followed explicitly. Otherwise, a disgruntled member could cry foul and file a lawsuit.
Winding up might sound like you’re launching an LLC in D.C. The insider term actually refers to notifying a number of key people and handling a variety of business issues. These generally include notifying your registered agent, vendors, independent contractors, and customers that you are closing the organization. You’ll also need to cancel licenses and permits, resolve employee matters, and close bank accounts as well as business lines of credit, among others.
Dissolving your LLC is a fair and equitable process in which business owners and operators resolve outstanding debt before shutting down. Although notification is not necessarily a statutory requirement in D.C., doing so helps maintain your standing in the business community. That’s one reason to contact all creditors and claimants and resolve outstanding balances. You’ll either need to pay them off in full or agree on a formal, in-writing settlement.
The District of Columbia does not task LLC owners to apply for and wait for a tax clearance letter before shuttering the entity. By that same token, taxes cannot go unpaid. File a final tax return with the Office of Tax and Revenue and the federal IRS. Failure to file and pay outstanding business taxes will likely result in the government holding you personally responsible.
The Washington DC Secretary of State platform has transitioned business services to the Department of Licensing and Consumer Protection. That’s where you can complete Form DLC-8 (Statement of Dissolution for Domestic Limited Liability Company). The form can be downloaded and mailed to:
Digital filing can be completed at corponline.dlcp.dc.gov, and the cost of processing a Statement of Dissolution is $220.
The importance of a thorough and complete LLC dissolution cannot be understated. Leaving loose ends behind invites unexpected and costly surprises, such as being responsible for unpaid rental space fees, back taxes and penalties, or a hacker halfway around the world charging electronic devices under your LLC’s name. If you don’t have the time or energy to deal with this sometimes tedious LLC dissolution process, consider getting support.
People from all walks of life seem to have a unique reason for deciding to dissolve their LLC. Common reasons include retirement, the high cost of doing business in the nation’s capital, goal fulfillment, relocation, or other opportunities. The benefits of properly closing down an operation and dissolving the LLC help insulate you from further financial responsibility.
The fee for processing a Statement of Dissolution is $220. It’s important to keep in mind that delinquent fees and penalties are required as well. You must also resolve any tax debt at some juncture.
The short answer is: yes. Go to the DC Department of Licensing and Consumer Protection website. You’ll be directed to corponline.dlcp.dc.gov, where you can log in or create an account and complete a digital filing. If you have difficulty locating the Department of Licensing and Consumer Protection, you can click through from the Washington DC Secretary of State website.
Dissolving your LLC takes anywhere from 15 to 30 days in the District of Columbia. If you include an Expedited Service Action Form, one-day and three-day processing are options. Walk-ins have the option of paying for same-day processing, but you may have to wait. The office accepts cash, Visa, Mastercard, checks and money orders made out to the D.C. Treasurer.
If you fail to complete the LLC dissolution process, the entity stays on the database until administratively dissolved. In the meantime, the business may continue to incur debt, fees, and penalties and could be used by scammers. Unless you dissolve your LLC, you could be held responsible for these debts.
Each state, as well as the District of Columbia, handles its own business entity services. Having a franchise that operates across these lines, or more than one company, means you will have to complete the LLC dissolution for each organization.
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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