Dissolving an LLC in Colorado consists of various steps that must be taken to cease the business legally. If you don’t follow the proper steps to cancel your LLC, you could have lingering charges, sanctions, and other legal issues.
This article explains everything you need to know to dissolve an LLC in Colorado and offers practical suggestions for an effective process.
1. Review Your Operating Agreement
The first step in this process is to review your LLC’s operating agreement. In many instances, this document specified how the business should be dissolved, including the requirements for member voting, who should file the paperwork, and how the remaining assets and liabilities are to be handled.
If your LLC doesn’t have an operating agreement, then you’ll have to comply with the Colorado Limited Liability Company Act, which governs the dissolution of LLCs in the state.
Reviewing this agreement should allow you to prepare for any potential problems that might occur during the dissolution process.
2. Hold a Member Meeting and Approve Dissolution
Arrange a member meeting for the LLC to propose and vote on dissolution. The vote to dissolve the LLC must adhere to the voting requirements as per the operating agreement.
In the absence of specific provisions, such a decision must be backed by a vote of two-thirds or greater of the members. Make notes of the minutes or notes from the meeting and the decision to dissolve the LLC since these may be needed later in case of disputes or for compliance requirements.
3. Submit Articles of Dissolution
To legally dissolve your LLC in this instance, in Colorado, Articles of Dissolution must be prepared and filed with the Secretary of State. This action is intended to officially inform the state government of Colorado that the operation of the LLC is being terminated. To complete the filing, follow these instructions:
- Visit the Colorado Secretary of State’s website.
- Search your LLC records to check that all details are accurate.
- Fill out the electronic form for the Articles of Dissolution including the necessary information such as the name of the LLC, entity ID, and the time frame of the dissolution.
- Pay the prescribed office fee which is generally $25, however, you should check the Secretary of State’s fees on their website to be certain.
- Complete and submit the form through the internet and save a copy of the confirmation for your files.
Your LLC will no longer be allowed to operate in Colorado after the Articles of Dissolution are submitted. People usually prepare and file this document on time to avoid any fines or non-compliance fees.
4. Settle Outstanding Debts and Obligations
Here make sure that all outstanding financial obligations are taken care of before any closing. It is important so that one does not leave the creditors or any other parties having unresolved claims against your LLC. Here’s what to do:
Pay Off Debts: Look at the financial history of your LLC and pay off debts to any remaining vendors, lenders, service providers, etc.
Notify Creditors: Let your creditors know about your LLC’s dissolution and give them a deadline to put in their requests.
Close Accounts: Cancel any business-related account or credit cards, lines of credit, and vendor accounts to avoid any further expenses.
Address Contracts: End any leases, service contracts, agreements, and other contracts that may incur costs.
5. Notify Tax Authorities
Make sure that all tax dues are cleared because otherwise, you may invite unwanted tax claims against you in the future. This encompasses federal, state, and local taxes as well. Make sure you do the following procedures to be safe:
Submitting A Final State: Submitting a final tax return to the Colorado Department of Revenue with a note or description stating it is the final tax submission from their end.
Clear Tax Liabilities: This may include sales, payroll, or even income tax debts. If you’re in doubt, you may contact the Department of Revenue in Illinois for assistance.
Obtain a Tax Clearance: Remember that some states require an LLC to obtain tax clearance before dissolution is approved. In such cases, the certificate serves to show that all tax obligations are performed.
6 Inform IRS
Sending a letter stating that the business has been dissolved will suffice, but only if the EIN was issued. Otherwise, if the LLC had not acquired the EIN in the first place, there is no need to fill out the 1065 or send a letter to the IRS about the dissolution of the LLC.
The following steps describe how to properly dissolve your LLC: For example, revoke the registration with the IRS if there was an Employer Identification Number.
Filing a Final Federal Tax Return: The answer to the question is already clear: if an IRS account exists for the business LLC, then the federal tax return also exists. In this tax return, however, one must physically write on the tax return that it is a final return for a given LLC.
Close the IRS Account: Write to the IRS stating the EIN and that the LLC has been dissolved, and attach copies of articles of dissolution. A confirmation that the IRS closes the business account of the LLC and confirmation that no further tax correspondence will take place is also sent.
7. Cancel Registrations, Licenses, and Permits
To complete the process of dissolution and dissolution of an LLC, all registrations and license permits for conducting business issued by local or state authorities should also be revoked.
Revoke Business Registrations: In this way, cancel the registrations: Find all the registrations that need canceling in order to avoid being permanently registered with other business activities including becoming a registered entity through complete paperwork for a tax registration.
Contact Issuing Agencies: Reach out to the relevant authority that provided the document in question and follow the detailed cancellation steps.
Cancellation Record Keeping: In order to avoid such situations in the future, proper records should be kept of all such cancellations.
8. Transfer Remaining Assets
Following the settlement of debts and obligations, the remaining assets shall be divided among the members of the LLC. The formula to be used in this case is the one provided in the operating agreement or default LLC asset distribution rules set by Colorado, in the absence of such agreement. Keep a record of all distributions to ensure any disputes arising from the agreements are avoided.
9. Record Keeping
It is good practice to keep important records even after your LLC has been dissolved for around five years to safeguard yourself against any unreasonable requests. These records include:
- Articles of Dissolution
- Final tax returns
- Financial statements
- Meeting minutes and resolutions
- Correspondence with creditors and government agencies
Considering these samples will aid in ensuring protection is available for future audits or legal questions.
How EasyFiling Makes It Easier
Dissolving an LLC is not an easy process and can be time-consuming. At EasyFiling, we make sure that this process is as easy as possible ensuring that every step is handled with utmost priority and meticulously. Here is how EasyFiling comes in handy:
Professional Help: Our experts will help you with each step of the dissolution process including filing Articles of Dissolution, tax payments, and unneeded licenses.
Filing and preparing the documents: EasyFiling eliminates the stress of making preliminary and other documents needed to electronically file for the Articles of Dissolution with the Colorado Secretary of State.
Support in tax compliance: All aspects and levels of taxes federal, state, or local can be filed through our support in final tax filings.
Custom Solutions: LLCs that have complex scenarios including multiple members are not a problem, we offer services that suit them.
The next time you want to dissolve an LLC, do not worry, focus on your next business project after choosing EasyFiling services.
Book a free consultation today to dissolve an LLC in Colorado.
FAQs on Dissolving an LLC in Colorado
How much do you have to pay to file Articles of Dissolution in Colorado?
Articles of Dissolution can be filed for a $25 fee. Always check with the Colorado Secretary of State’s Secretariat to see if there are any changes to the fee structure.
Do I have to inform the IRS about the dissolution of my LLC?
Yes. You need to inform the IRS by completing a federal tax return after closing your business account. Completing this step helps with marking your EIN to inactive status, preventing tax correspondence in the future.
How much time does it take to dissolve an LLC in Colorado?
In most cases, as soon as Articles of Dissolution are filed online with the Colorado Secretary of State, the domain is completed. However, settling tax statements as well as other related activities may take longer.
What are the consequences if I don’t dissolve my LLC the right way?
Not dissolving your LLC the proper way will incur billing and penalties as well as leave you with other legal issues. In addition, your creditors or tax authorities may file claims against your LLC bonds as well.
Is EasyFiling able to assist with the process of dissolving the Colorado LLC?
EasyFiling is capable of providing assistance in a number of areas of the dissolution process, such as the filing of the Articles of Dissolution, the payment of taxes, and others necessary to meet local and federal requirements.
Nabin Adhikari
