The process of dissolving an LLC in Illinois might be tedious, but if the legal steps are followed, liabilities in the future can be avoided. In Illinois, the Members’ Agreements may also include other protocols surrounding LLC operations.
Understanding the dissolution process is key when considering permanently closing a business or moving to a different structure.
What needs to be done to legally dissolve an LLC in Illinois is explained in this article.
Step 1: Review Your Operating Agreement
Most of the LLCs are bound by an internal agreement describing the process to be followed in case of dissolution. This document may include:
- Requirements regarding the voting process to approve the dissolution.
- The procedure for liquidation of the company assets after closing.
- Procedures for informing the members and creditors of the company about the dissolution.
If your operating agreement is supposed to contain such clauses and you have them, then it is crucial to follow these clauses step by step. In case there are no bylaws in place, default provisions in the Illinois Limited Liability Company Act will apply and it becomes even more essential to know of these legal provisions.
Step 2: Hold a Member Vote
Draft your laws before calling a meeting with them, if such a requirement is needed under your state laws or the operating protocols of the firm. A vote will frequently be needed for approval as per this agreement, or if that is not in place, will be required by the default rules of the state.
It is prudent to ensure that all members are well aware of the meeting and that any issues that need to be addressed are dealt with before the meeting starts.
When forming a single-member LLC if there is only one member in such a case it’s easy to dissolve the business because it is not necessary to come to a consensus, a basic document must however be established where it states why such an action was taken.
Step 3: File Articles of Dissolution
For you to put a stop in Illinois, you have to write down Articles of Dissolution and file them to the Secretary of State. Let us see how this can be done.
Obtain the Form: The article sets out the limits of dissolution that can be downloaded from the Secretary of State’s websites or even called the office directly.
Complete the Form: Provide the required details, including:
- LLC name as registered.
- Date of dissolution.
- Reason for dissolution (if applicable).
- Contact information for correspondence.
Submit the Form: Fill out and submit the stated application in person or online, or use the mailing option. Don’t forget to add the filing fee which comes to about $100. You will have to check with the Secretary of State for confirmation. It’s also possible that there are expedited services that can be provided against additional payment.
Mailing Address: Illinois Secretary of State Department of Business Services 501 S. Second St., Room 351 Springfield, IL 62756.
Let’s also make sure that you keep a copy of the filed Articles of Dissolution for your records.
Step 4: Resolve Outstanding Taxes and Debts
So before your LLC can be dissolved, let me remind you that all outstanding state dues and federal tax must be settled. For this purpose obtain a Tax Clearance Certificate from the Illinois Department of Revenue that clear you of any outstanding taxes or liabilities. Besides such things, you should:
- Settle any unpaid dues, including the final tax return submission such as state and federal income tax, sales tax, employment tax as well as business tax payments.
- If registered in Illinois, deregister their business tax with that state.
- Clear any outstanding dues about franchise taxes or other fees payable by your LLC.
These tax obligations, if not cleared in time can attract penalties and other actions while the LLC might have been dissolved. An accountant or tax consultant may be a good idea to consult with regard to these tax issues.
Step 5: Notify Creditors and Close Accounts
Let your creditors and suppliers know that your LLC is being dissolved. This allows you to avert future claims arising from the business. Also:
- Settle all undetermined debts owed to vendors, lenders, and service providers debts.
- Tell clients and customers about this closure, especially if there is a delivery or service still pending.
- Terminate any business banking accounts and credit lines.
- Nullify the permits, licenses, and registrations associated with the LLC.
To inform the creditors officially look for written notices that are formal, and state the reasons for the dissolution together with guidelines on how to make final claims. This step is not only protective of the LLC but also fosters good business practices.
Step 6: Distribute The Remaining Assets
Along with the settlement of all the debts, the remaining assets are shared among all the members of the LLC as provided for in the operating agreement, or as provided for by Illinois state law. Usually, this would entail;
- Payment of creditors either fully, or as may have been agreed.
- Distributing any remaining assets using ownership percentages or agreed terms under the operating agreements.
When there are disputes regarding asset distributions, mediation or lawyers may have to be sought to resolve the issues in a fair manner.
Step 7: Maintain Records
Retain the records in proof of the dissolution in a thorough way in the following way;
- Minutes from the meeting that include the decision to dissolve.
- Certificates that show there’s been a tax clearance.
- The articles of dissolution that have been filed copy.
- Accounting for correspondence with the creditors and final statements of the closure of the account.
The state of Illinois requires businesses to keep these documents for several years as this comes in handy during audits, in cases of legal disputes, or inquiries from regulatory authorities. The risks arising from the aftermath of the dissolution can be mitigated by having organized records.
Additional Considerations
Closing Employee Accounts
In case your LLC has employees, make sure that all the final salaries, compensation, and payroll tax withholdings are conducted. Submit all the required employment tax returns, close the payroll accounts, and issue the employees with the required documents, for instance, W-2s.
Canceling Business Insurance
Get in touch with your business insurance providers such as liability insurance or workers’ compensation and ask them to end any business policies they hold in your name. Ensure that no business premiums will be charged once the dissolution date arrives.
Handling Intellectual Property
If it is determined that your LLC possesses or owns any trademark, patents, or copyrights, then you should probably determine whether to sell, transfer, or retire these intellectual property assets. Also, you may be required to inform USTPTO about the dissolution.
How EasyFiling Can Help
If you do not have much knowledge regarding Illinois state laws, and why an LLC was created in the first place, then the dissolution process is going to be a tedious and painstaking experience for you. EasyFiling is in the business of helping business owners, such as yourself, with the legal and administrative tasks that are required to be fulfilled properly and efficiently by dissolving the LLC. Follow along to gain more insight on EasyFiling’s help:
Filing Assistance: We take care of the drafting and filing of the Articles of Dissolution that are to be submitted to the Secretary of Illinois’s Secretary of State Department.
Tax Clearance Support: If you have not been able to deal with tax obligations in the past, do not worry, our team can assist you in getting this tax clearance certificate.
Creditor Notifications: We assist you and offer templates that can be helpful in notifying creditors and other members regarding the LLC’s dissolution.
Customized Solutions: If you feel our services are too generic, and need us concerning employee account completions, dealing with intellectual property, or dealing in records retention, EasyFiling does not disappoint.
Peace of Mind: We understand how tiring and overwhelming the dissolution process can be, this is why EasyFiling guarantees you that every step is done professionally, while enabling you to shift your focus to more important things, such as your new business.
If you are worried about how the process is going to be seamless, do not worry, Book a free consultation today with Easyfiling to dissolve an LLC in Illinois.
Frequently Asked Questions (FAQs)
How long does it take to dissolve an LLC in Illinois?
Wait about 2-3 weeks after you have submitted the Illinois Articles of Dissolution to the Secretary of State. This may be shortened if the submission is expedited.
Are there any fees for the dissolution of the LLC in Illinois?
Yes, you will be charged a $100 fee for filing the Articles of Dissolution. Please be informed that some additional fees might also be necessary for expedited submission and tax clearance certificate services.
Do you need a Tax Clearance Certificate for LLC dissolution?
Yes, you will have to present a Tax Clearance Certificate issued by the Department of Revenue, Illinois which proves that there are no pending state tax issues.
What if I forget to dissolve the LLC?
You might have other tax liabilities and penalties or legal liability if your LLC gets dissolved improper way. Creditors and government agencies would be able to file claims against your LLC.
Does EasyFiling assist with LLC partial dissolution or restructuring?
Yes, EasyFiling assists with the partial dissolution of LLCs, restructurings, and changing business forms in Illinois while adhering to the regulations of the relevant authorities.
Nabin Adhikari
