Ending a business you’ve worked hard to build is rarely easy. But sometimes dissolving your South Dakota LLC becomes necessary or strategic. Formally dissolving ends your company’s legal existence and protects you from ongoing taxes, liability risks, and complications down the road. Follow this comprehensive guide to smoothly dissolve your LLC.
Legally dissolving an LLC means formally terminating its existence as a registered business entity with the state of South Dakota. It involves more than just temporarily shutting down operations or suspending your business license.
You must file Articles of Termination with the Secretary of State to officially dissolve your LLC status. This releases you from ongoing reporting requirements, tax and fee obligations, and legal protections that come with LLC registration.
After dissolution, your business becomes fully unincorporated. Any remaining assets, debts, and liabilities transfer directly to the LLC’s individual members personally moving forward.
While dissolution ends the registered LLC entity, members can continue informal business activity as a general partnership or sole proprietorship if desired. However, they will take on full personal liability without the legal and tax protections of the LLC.
There are three main types of LLC dissolution to understand:
South Dakota’s Secretary of State can administratively dissolve an LLC if:
Administrative dissolution is initiated by the state itself for compliance reasons. But it can unintentionally create major tax headaches and personal liability issues if a dissolved LLC continues operating.
Staying proactive about compliance helps avoid administrative dissolution. If it happens, you must quickly reinstate or voluntarily dissolve your LLC to avoid complications.
Courts can order the dissolution of an LLC through judicial action. Members, managers, creditors, or other related plaintiffs may request this.
Common grounds for judicial dissolution include:
Judicial dissolution is uncommon and initiated through formal legal action. A judge ultimately decides if forcibly dissolving the LLC over the objections of members is justified. This is a lengthy process often involving hearings and testimony.
Voluntary dissolution occurs when an LLC’s members decide to formally dissolve the company. They must settle all debts and distribute remaining assets before filing termination paperwork.
Voluntary dissolution is the standard way most LLCs dissolve. Members opt to do this for strategic reasons or because continuing operations becomes impossible due to insurmountable disagreements.
Follow these key steps to voluntarily and successfully dissolve your LLC:
The first step is formally deciding to dissolve. How you vote depends on your management structure:
Single-member LLCs can voluntarily dissolve whenever the sole owner decides.
Multi-member LLCs require a majority vote or unanimous consent to dissolve depending on the operating agreement.
If multi-member, hold a dissolution vote at an official meeting with proper advance notice given to all members. Document the results in detailed meeting minutes signed by all members present.
Before voting, carefully review your operating agreement for provisions governing voluntary dissolution including:
Following your operating agreement’s terms reduces conflicts. If you lack an agreement, create one before dissolving to outline terms.
South Dakota does not have statutes dictating what voting percentage is required to dissolve an LLC. Defer to your operating agreement if you have one. Without an agreement, approval from a majority of members is generally sufficient and standard.
Once the dissolution vote is held, document the decision in official meeting minutes. Maintain this record for reference throughout the process.
Before legally dissolving, you must wind up all ongoing LLC business operations and affairs. This includes:
Thoroughly winding up takes time but prepares the company for dissolution. Maintain detailed financial records too.
South Dakota law requires dissolving LLCs to formally notify all known creditors and claimants of the impending dissolution. This allows them to make any final claims against the LLC.
To provide proper notice as required:
These notices must state your LLC is dissolving and request any claims against the company be submitted within 90 days.
During the 90 day claims period, pay any outstanding debts submitted by creditors from LLC funds. Then distribute any remaining assets to members as outlined in your operating agreement. Keep meticulous records of all notices and payments.
Before dissolution, your LLC must file final federal, state, and local tax returns and pay any taxes owed through the date of dissolution.
South Dakota requires you obtain specific tax clearance from the Department of Revenue before allowing LLC termination. Request this once you’ve filed returns and paid final taxes.
After receiving tax clearance confirmation, request an account closing letter from the IRS to document your LLC’s settled tax status. Having this provides extra protection.
Once your business affairs are completely wound up, prepare and file Articles of Termination to formally dissolve your LLC.
How to File Articles of Termination in South Dakota:
Once your business affairs are completely wound up, prepare and file Articles of Termination to formally dissolve your LLC.
How to File Articles of Termination in South Dakota:
2. Complete and sign the South Dakota Articles of Termination form in full.
3. Pay the $50 filing fee to the Secretary of State, either:
That’s it! Once your Articles of Termination are approved, your South Dakota LLC will be formally dissolved.
Confirm full dissolution by requesting a certificate of termination from the state for your records.
Dissolving an LLC requires far more than just closing up shop. You must wind down operations, pay off all debts, distribute remaining assets, and file termination paperwork.
Properly completing each dissolution step shields you from taxes, lawsuits, and other issues down the road. Work closely with your attorney, accountant, and registered agent to ensure your South Dakota dissolution goes smoothly.
While ending a business you’ve worked hard to build is certainly difficult, formally dissolving your LLC allows you to move forward with a clean slate. With proper planning and support, you can tie up all loose ends and shift your focus positively to the future.
Some common reasons members choose to dissolve an LLC:
The business is no longer operating or profitable
Members want to part ways and pursue other interests
Irreconcilable disagreements or dysfunction between members
Protecting personal assets before excessive company debts accrue
It costs $50 to file Articles of Termination and officially dissolve your South Dakota LLC. Additional expenses may include legal, accounting, taxes, notifications, document filings, asset sales, employee severance, lease terminations, and other professional services involved in winding up.
Yes, you can complete and submit Articles of Termination electronically through the Secretary of State website’s online filing system. Mailing paper forms is also an option.
After your Articles of Termination are filed, it typically takes 1-2 weeks for South Dakota to officially process and approve the dissolution. Timing varies based on payment method and form completeness. Obtaining tax clearance can also add time.
If you don’t formally dissolve, your LLC remains actively registered and obligated to comply with state requirements. You risk fees, taxes, and personal liability for any ongoing or future business debts.
If your LLC is registered in multiple states, you must file dissolution paperwork individually with each state. Your company is only fully dissolved once all states have approved the termination.
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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