While forming an LLC in Maryland is something that can be exciting and positive, in some cases there could come a time when you need to close it.
Dissolving an LLC in Maryland makes sure all your company’s legal obligations are met. Whether you’re wrapping up a successful run or stepping away from a business that didn’t go quite as you planned, it’s important to understand the process and requirements involved in legally dissolving your LLC under Maryland law.
Dissolution means the end of your LLC’s existence in the state where it was organized and is registered. While there are several ways this can come about, all of them officially and legally dissolve your business.
Dissolving a limited liability company (“LLC”) legally terminates your company so it no longer exists. When you dissolve your LLC, you cut off your business operations; settle all unsettled debts; remove property and assets from your business’s name and distribute to the members; and then file paperwork with the state.
There are three types of LLC dissolution – judicial, administrative, and voluntary. Each dissolution type has different causes and processes.
An administrative dissolution is where the state itself dissolves the company. This usually happens because the entity has not followed legal responsibilities. For example, a company that hasn’t filed its state tax returns or paid taxes may be administratively dissolved.
This type of dissolution happens when a court dissolves the LLC. One common reason for judicial dissolution is when the LLC is unable to resolve internal disputes among its members. Another common cause is fraud. If a legal issue arises to make the LLC’s continued existence untenable, the court may step in to dissolve it and distribute its assets.
This type of dissolution of an LLC is by member vote. Generally, this involves taking a vote to dissolve; you’ll then wind up business affairs, settle debts, distribute what’s left over to members, and file the necessary paperwork with the state of Maryland. The rest of this article focuses on voluntary dissolutions, not administrative or judicial ones.
The first step to dissolving your Maryland LLC is to call a meeting at which the members will vote on whether the business will be dissolved.
In a single-member LLC, the LLC may be dissolved by the lone member by unilateral action. In a multi-member LLC, a vote (majority or unanimous, depending on the provisions of the operating agreement) is often required to pursue dissolution.
Your LLC’s operating agreement may spell out the exact steps for dissolving the company – such as actuarial requirements for voting and the distribution of assets. If your LLC operating agreement discusses dissolution, be sure that you conduct the process in accordance with the agreement and Maryland law.
Unless your operating agreement provides differently, your Maryland LLC can be dissolved after 90 consecutive days where it has no members. If the members unanimously consent, though, the LLC can be dissolved right away. It’s always a good idea to have any member vote recorded in writing.
When the decision to dissolve has been made, the next step is to begin winding up your business affairs. You will need to inform your registered agent, vendors and clients that the business is closing. Business licenses and permits will also need to be canceled, employment issues addressed, and business bank accounts closed. Other administrative issues should also be addressed to make closure as easy as possible.
The Maryland Secretary of State’s website helpfully sets out these required steps and includes links to the relevant forms and documents you’ll need.
Next, you need to:
Give notice to the LLC’s creditors and claimants of the impending dissolution. If the LLC has not yet paid its debts, you must settle them before finalizing the dissolution. Any assets remaining are allocated to the LLC members in accordance with the terms of the LLC’s operating agreement.
Before you dissolve your LLC, you’ll need to file your final tax returns and pay your outstanding taxes. You’ll also need to request a tax clearance letter from the Maryland Comptroller to make sure your LLC doesn’t owe any state taxes.
After you take these steps, you’re ready for the final one: filing Articles of Cancelation with the Maryland Secretary of State so the state can officially delete the LLC from its system. To do this, just complete the cancelation form, pay the filing fee, and submit it. You can typically do this online or by mail.
To submit the Articles of Cancelation form online, you’ll just need to create a login and then click on the “manage” menu to access the documents you need to close your business.
Dissolving your Maryland LLC is an important step in closing this chapter of your business. It’s important to do your homework on the process to ensure it goes smoothly. First, carefully review and follow your company’s operating agreement. If it doesn’t provide a process for dissolving your company, waiting 90 days will automatically dissolve your LLC and allow you to file Articles of Cancelation with the state. While this is happening, you can take the other necessary steps, like canceling your licenses and permits, paying off all debts, distributing assets, and notifying the appropriate parties.
Your LLC needs to be formally dissolved so you can completely end your business, block future legal liabilities, and ensure all financial and tax liabilities are paid.
In Maryland, the cost to dissolve an LLC includes the filing fee to file the Articles of Cancelation, which is $0 for non-expedited processing or $50 for expedited processing. You might also have additional costs in the form of paying off any outstanding debts or canceling business licenses.
Yes, by filing the Articles of Cancelation at the Maryland Secretary of State's website.
With a few exceptions, the time to dissolve an LLC depends on how quickly you execute the necessary paperwork. It usually takes at least a few weeks after the Articles of Cancelation are filed to officially end your business.
If you don’t formally dissolve your LLC, it will remain active. You might continue to be charged fees and taxes, and you'll remain subject to legal claims against the business.
You must settle outstanding obligations before you complete the dissolution process. Creditors can sue you if your company's debts aren't paid, and LLC members could be held personally liable.
In some cases, you can reinstate an LLC after it has been administratively dissolved. This typically requires you to file the necessary forms, pay any outstanding fees, and address the issues that led to the dissolution. Voluntary and judicial dissolutions, on the other hand, are final and usually can't be reinstated.
Once your LLC is dissolved, the name is typically released and may become available for others' use. If you plan to restart your business or want to retain rights to the name, you should consider registering it as a trademark or reserving the name with the state of Maryland.
Yes, you should notify your registered agent that your LLC is being dissolved so that they can stop providing their services and manage any remaining legal notices or documents properly.
Failing to dissolve your LLC properly can mean you continue to be liable for state fees, taxes, and potential penalties. Your LLC could be administratively dissolved, which could complicate things if you decide to restart the business in the future.
Yes, as part of the winding-up process, you should cancel any business licenses and permits associated with your LLC. This helps avoid fees and ensures you aren't held liable for any obligations tied to these permits and licenses.
Dissolution refers to the process of closing down the business and winding up its affairs. Termination refers to the final step in which the LLC’s legal existence officially ends. In Maryland, filing Articles of Cancelation with the Secretary of State is the act of terminating an LLC after it has already been dissolved.
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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