Dissolving a Limited Liability Company or LLC in Massachusetts needs certain legal procedures to be followed to ensure the smooth completion of the process.
It is important to follow proper procedures, whether it is due to financial issues, pursuing new opportunities, or any other type of closure, to avoid future liabilities.
Let us look into how you can dissolve an LLC in Massachusetts step by step.
1. Vote to Dissolve the LLC
Typically, an LLC operating agreement outlines the guidelines or rules that need to be followed when attempting to dissolve an LLC. The members or managers of the LLC may be required to vote. There can only be one vote per member, but the vote must be in favor of dissolution for it to pass.
For Single-Member LLCs: You have the sole decision-making power as a member and thus have the option to dissolve the LLC whenever convenient.
For Multi-Member LLCs: A vote will take place for an LLC that has more than one member, and the required majority must be in support of the dissolution.
2. File a Certificate of Cancellation with the Massachusetts Secretary of State
After a favorable vote, the next step is to file a Certificate of Cancellation with the Massachusetts Secretary of State. This document formally ends the existence of the LLC in that particular state.
Form Name: Certificate of Cancellation
Submission: You can submit the form on the Internet or during a personal visit to the secretary of the commonwealth’s office.
Submission Costs: $100 (for submissions via the Internet) or $125 (for offline submissions).
Filing this form online is straightforward. To start, you will have to provide the basic details of the limited liability company. This includes but is not limited to; the name of the LLC, the date of formation, and a confirmation statement regarding the dissolution of the LLC.
3. Pay Off the LLC’s Debts and Liabilities
You will need to pay off the debts or liabilities associated with the LLC as an entity before you can completely dissolve the LLC. This can include any pending payments owed to employees, vendors, taxable creditors, and even business taxes.
Final Tax Returns: You will be filing the last tax returns to the IRS and the Massachusetts Department of Revenue. You must notify the state and federal agencies during the dissolution process to prevent any legal ramifications.
- Federal Taxes: If you’re operating as a partnership, your company will need to submit final Form 1065 as well as Form 1120 for corporations.
- Massachusetts Taxes: Always try to pay off the taxes before dissolving the LLC if the company owes state taxes.
4. Share the Remaining Assets
After settling all the debts and liabilities, the LLC’s remaining assets balance should be shared among the members. The stipulations of the asset one’s division need to be followed as put forth in the LLC operating agreement. Follow all terms carefully if the operating agreement provides any terms on how assets should be divided.
Not having the Operating Agreement: If the LLC has no such document, the law of Massachusetts stipulates that equal percentage dividends should be issued based on ownership proportions, for example, all assets should divided among all members.
Tax Concerns: distributing the assets could incur some tax levies so consult the tax expert to ensure that there are no unwelcome surprises.
5. Delete All of the Business Licenses, Permits and Registrations
Once the debts of the LLC are settled and assets are shared between the members, it is necessary to delete all business licenses, permits, and registrations for the LLC. This ensures that the LLC does not have any further responsibilities linked to those permits.
Canceling Business Licenses and Permits: If your LLC has business licenses or state permits for a particular business in Massachusetts, it holds, get in touch with the particular government department to cancel them officially. It may involve sales tax, professional, or health permits.
Federal Employer Identification Number EIN: Should your Limited Liability Company (LLC) have an Employer Identification Number (EIN), inform the Internal Revenue Service (IRS) that your LLC has dissolved. You may not revoke the EIN, but it is best to keep them informed.
Signage and Zoning Permits: Further, if your LLC engages in business within a certain city, you may also need to cancel local business permits, zoning permits, or even signs for clearances.
6. Inform Creditors and Other Interested Persons
Anyone who may be impacted by the dissolution of your LLC such as customers, business partners, or your employees will need to be informed. Getting this right is very important and it will make your final business dealings less complicated.
Creditors and Suppliers: Deliver a formal communication to your creditors and suppliers informing them of the existing state of affairs that the LLC is dissolving and that it will no longer incur future debts or obligations.
Employees: In case you have employees, make sure to cover all taxable wages and make the necessary payroll tax payments. As required by state regulations, employers must issue final paychecks to employees as well.
Public Notice: In some situations, the law in Massachusetts requires that you publish a notice of dissolution in a local newspaper. This is done to inform the creditors of the LLC’s dissolution and, as a courtesy, the general public.
7. Retaining Some of Them
Even when the LLC has been dissolved, certain business documents are required to be maintained for a set duration. They may come in handy for accounting, legal, or other purposes.
Duration of Record Retention: You should keep records for at least 3 to 7 years for legal compliance and to cover your bases.
Types of Records to Retain: Most importantly, you need to have copies of tax returns, financial reports, employee files, and other documents that you may have exchanged during the dissolution process.
8. File Articles of Dissolution (Optional)
Although the Certificate of Cancellation is the most important paper for dissolving your LLC in Massachusetts, some business owners decide to submit additional documentation to detail the extent of the dissolution.
Articles of Dissolution: In the case of LLCs, Articles of Dissolution might have to be filed with the state depending on the operating agreement or other legal factors. While this document isn’t always required, it can be used to formally end the business and financial affairs of the LLC.
How EasyFiling Can Help
Although dissolving an LLC can be a tedious process, EasyFiling knows precisely how to lessen the burden by providing expert advice and facilitating the filing of essential documents. If you are a busy entrepreneur or simply looking for easier ways to dissolve an LLC, you can relax as EasyFiling can assist you with:
Cancellation Certificate Filing: EasyFiling takes care of the paperwork, ensures the Certificate of Cancellation is correctly filled, and submits it to the Secretary of State of Massachusetts.
Tax Liabilities Settlement: EasyFiling can assist in filing final Federal and State tax returns so that all taxes owed by the LLC are settled before dissolution.
Notifying Creditors:: Letting your creditors and business partners know about the dissolution is very important and EasyFiling can help with this task too.
Distributing Assets: If required, we can assist you with the distribution of the remaining assets of the LLC under the operating agreement or state law.
Cancellation of Licenses and Permits: EasyFiling will assist you in canceling your business licenses, permits, as well as registration with the LLC so that you are not held liable by default.
By working with EasyFiling, you can rest assured that the dissolution of your company in Massachusetts will be taken care of quickly and without further involvement since it will be done by all state regulations. This allows you to prioritize your business or personal goals.
Book a free consultation today to dissolve an LLC in Massachusetts.
Nabin Adhikari
