Even the most successful businesses sometimes reach a point where it’s time to close the chapter. Even if it’s enjoyed success, there may come a time when dissolving the company is the best path forward. Changing market conditions might make your Louisiana business less profitable than it once was, or perhaps you’ve achieved the goals you set out to accomplish and are ready for your next venture. Whatever the reason, knowing when it’s time to move on is key to future success.
Whatever your reason, there’s a dissolution process you must follow to protect your LLC and yourself personally. Below are some reasons for dissolving an LLC, different types of dissolution, and specific steps and requirements for doing so in Louisiana.
Dissolution is the process of shutting down an LLC in the state where it was organized and is registered. Once you dissolve your Louisiana LLC, it is officially put to bed and no longer exists in the state.
To properly dissolve your LLC, it isn’t enough to put a “closed” sign in your window and stop going to work. You must remove your LLC’s status as an active company by canceling it with the Louisiana Secretary of State.
You need to make sure the Secretary of State accepts your dissolution application. To do that, there are specific steps you need to follow, including notifying your creditors, resolving existing debts, and settling tax and employment issues with the appropriate government agencies. This is required to protect you and your LLC from future liabilities.
LLC dissolution can be voluntary or involuntary. Involuntary dissolution may be either administrative or judicial.
Administrative dissolution is an act of the Louisiana Secretary of State, taken when an LLC fails to meet certain Louisiana legal requirements. It strips the LLC of its rights, powers, and authority. It can be imposed for failure to file reports and pay state fees in a timely manner or failure to maintain a registered agent on file.
Judicial dissolution is an act of the court. It’s sometimes known as the corporate death penalty. A court can order an LLC to be dissolved when there is mismanagement, fraud, or a breach of fiduciary duty by a member or manager. It can happen when a member cannot fulfill their duties due to death or incapacitation. It may arise from internal disagreement among managers. Often it is ordered by the court in response to a petition from one or more of the members.
Voluntary dissolution happens when you, or you and your fellow members, choose to end the business. Sometimes this is triggered by an event named in the operating agreement, such as the death or disability of a member. Other times it may be due to internal disputes or financial difficulties.
If there is more than one member, voluntary dissolution requires a vote. Depending on the operating agreement, a majority vote may be sufficient, or a unanimous vote may be required.
Here are the steps required for a voluntary dissolution for your Louisiana LLC.
If there is more than one LLC member, a vote will be necessary. The operating agreement should spell out the details about how the decision to dissolve will come about. The agreement may list triggers, such a the death of a member, that will require dissolution. For a dissolution that happens due to a vote of the members, the agreement may detail how that vote will take place. If the operating agreement is silent on dissolution, then the dissolution procedure must follow Louisiana law.
If you are the only member of your Louisiana LLC, it’s up to you to make the decision on whether to dissolve. It you have fellow members, the decision will necessitate a vote, and it may require either a majority vote or a unanimous vote.
Any LLC that wants to dissolve must consult the operating agreement to see what its dissolution rules are. These can include:
A dissolving LLC must wind up its activities in an orderly fashion. Here are a few of the steps you may have to take:
You may choose to close your LLC if it is running into financial difficulties. However, dissolution doesn’t cancel any debts your LLC has incurred or resolve any lawsuits it may be involved in. You must inform all of your creditors of your pending dissolution so that they have the opportunity to collect what they’re owed.
Once all debts have be settled, you then must sell any remaining assets and distribute leftover funds to the LLC members in the manner specified by the operating agreement.
Louisiana does not require a domestic LLC to obtain a tax clearance, which is required in some states. However, the Secretary of State may check with the Department of Revenue and the Louisiana Workforce Commission to see that the proper paperwork has been filed. You must be up to date on tax and employee filings before you can dissolve.
You will have to complete all required Louisiana state tax and employee reporting. You must also follow the process specified by the IRS for reporting a business closure.
In Louisiana, the required dissolution form is called the Affidavit to Dissolve Limited Liability Company. There is a long form and a short form. The short form is for companies that are no longer doing business and have cleared their debts and assets. The long form is complex, and the State of Louisiana recommends that those who need to use it consult an attorney.
The sort form is available as a PDF that you can download and mail or fax to the Secretary of State. It requires that you fill in the LLC name, the name and contact information for the person filling out the form, the parish or county, and the names of all members or organizers. It requires the signature of a notary public. It must be accompanied by a remission of $100.
Once your affidavit is accepted, you will receive a Certificate of Dissolution. There is expedited processing available, $30 for a 24 hours turnaround or $50 for two to four hours.
The form may also be filed online at GeauxBiz, the all-purpose Louisiana business website. You will have to create an account to access the form. There are detailed instructions for completing the online form.
Once you have filed, your LLC exists only for the purpose of resolving a few remaining issues such as closing bank accounts and distributing assets to the members. Your LLC may no longer transact business.
Once your Affidavit to Dissolve has been accepted and you have received your Certificate of Dissolution, your LLC no longer exists. There iss a lot of work from the time you make the decision to dissolve until dissolution is completed, and many people will want to take a minute to look back on the LLC they built, managed, and eventually closed.
Some sadness may accompany your dissolution, even if it was the best course of action or even took place for positive reasons. Something is ending, but there’s also an opportunity for new beginnings. Congratulations on taking a risk, pouring your heart into a business, and on the learning and growth that you experienced!
Some people dissolve an LLC because the business is no longer viable, due to factors like lack of profits, poor cash flow, or changing market conditions. Sometimes, internal disagreement between the members is the cause. Other times, the LLC was doing well, but the member or members wanted to move on to something different. Whatever the reason, an LLC that is no longer doing business needs to dissolve to protect itself and its members.
It costs $100 to dissolve your LLC in Louisiana. Expedited processing is available for $30 or $50.
You can mail or fax you short form Affidavit to Dissolve by mail or fax, or you can submit it online at the GeauxBiz website.
For the affidavit, the normal processing time is about seven business days, but expedited processing takes either 24 hours or 2-4 hours. The time to complete all the shutdown tasks can be several weeks to several months.
The State of Louisiana will consider your business “active” even though it is no longer functioning. You may still be liable to pay fees, file reports, and pay accountants to submit them. You could be vulnerable to claims against the LLC if the dissolution is not completed.
You are required to submit dissolution papers in each state where your LLC is registered. You also have to meet final employment and tax reporting requirements for all the 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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