Terminating a Limited Liability Company (LLC) in South Carolina entails administrative, legal, and financial components and is not the simplest task.
Whether this is because you don’t want to continue with the business or have initiated another venture, adhering to certain procedures ensures that your LLC is effectively terminated with no outstanding responsibilities.
Here is a helpful guide to help you dissolve an LLC in South Carolina in a stepwise process while ensuring compliance with state laws to avoid possible issues in the future.
1. Understand the Importance of Dissolution
Terminating an LLC that is properly running eliminates concerns about legal battles or outstanding debt. Failure to voluntarily dissolve the LLC means outstanding liabilities in terms of taxes, fees, and other dues. LLCs are allowed to operate in this state for as long as they do not file for corporate dissolution.
2. Review Your LLC Operating Agreement
Typically, a member’s agreement (operation agreement) contains the process of how to wind up.
It should feature governance clauses such as:
- How members should vote to allow the dissolution.
- The procedure of how any remaining assets should be distributed.
- Responsibility for filing necessary documentation.
For the Standard LLC that doesn’t explicitly state how it should dissolve, South Carolina’s Default LLC laws are to be followed.
Pro Tip: Make sure that before carrying on with the process, all the members are aware of the dissolution clauses under the operating agreement.
3. Vote and Document Member Approval
- The dissolution of an LLC does not need discussion, it simply needs documentation. Most of the time, dissolving an LLC will require members of an LLC to vote formally on the matter.
- Record the vote in meeting minutes or a formal written resolution.
- All members need to counter-sign the document to indicate their concurrence.
This step affirms compliance with South Carolina state and internal company regulations and consequently integrity.
4. File Articles of Dissolution with the South Carolina Secretary of State
Filing Articles of Dissolution formally terminates your LLC and is a legal requisite.
Provide such information as:
- The name of the LLC.
- The incorporation date for the LLC.
- The date of filing of dissolution (if different from the submission date).
Enclosed is the completed form with the South Carolina Secretary of State’s office’s respective filing fee of 10 dollars (fee varies from time to time so please check the latest fee before filing).
Filing Options:
- Make an application online via the South Carolina Secretary of State’s portal for rapid services.
- Or post the form to the address indicated by the state.
5. Notify Creditors and Settle Outstanding Obligations
- Send claim alerts in writing to all the creditors regarding the dissolution of your LLC and set a claim timeline.
- Clear unpaid invoices that include loans, vendors, and unpaid employee salaries.
- Keep all the records of payments made to serve as evidence.
Why This Step Matters: Alerting the creditors and settling debts ensures that there are no disputes or claims in the future against the dissolved LLC.
6. Cancel Business Licenses, Permits, and Registrations
Inform all your local, state, and federal bodies about the closure of your LLC.
You should cancel:
- Business permits.
- Professional permits.
- Any local registrations.
A failure to cancel these permits would subject one to unwarranted fees, or even penalties.
7. File Final Tax Returns
State Taxes:
- On the last day of the company, submit the state tax form to the South Carolina Department of Revenue.
- On the form allow this as a final taxation return by marking the correct box.
Federal Taxes:
- Last personal income tax returns to the IRS.
- If your nature is a multi-member LLC and has people working for you, ensure that all look-for employer taxes have been filled, i.e. form 941 and form 940 respectively.
Sales Tax:
- If your LLC was selling tax your LLC should have a final sales tax return and pay the rest to pay off the debts as well.
8. Distribute Remaining Assets to Members
After all the debts have been settled, the remaining assets should be distributed to the members on the LLC’s basis proportionally to their capital accounts. The terms of distribution should be in accordance with their operating ideas, and policies that, the members must have signed in to.
Important Note: Asset distribution must be well documented to avoid conflicts between members.
9. Close Business Bank Accounts
Terminate the business bank accounts and the business credit lines of the LLC once every financial responsibility has been met.
Notify the bank to stop providing services, as the business is no longer active, and make sure that all the funds in the active accounts are allocated according to the set plan.
10. Retain Records of the Dissolution
Make sure that you retain the following documents because there will be overlap with other documents that may require further requests:
- Articles of Dissolution that have been filed
- Tax clearance certificates
- Notices directed towards the creditors
- Documentation of debt settlement and distribution of net assets.
It is necessary for some states in South Carolina to hold these documents for a specific time after the business has dissolved, e.g., in this case, 5 years.
Common Mistakes to Avoid During Dissolution
Failing to meet tax obligations: All filing obligations that relate to taxes must be finished before filing for dissolution of the company.
Failing to Notify Creditors: Failing to notify crediting agencies may enable lawsuits or other claims against your entity.
Not Canceling Licenses and Permits: Failing to cancel licenses has the potential to generate additional costs.
Transitioning too fast: The company dissolution or terminating business is a process that must be meticulously executed as a sequence of processes. Don’t skip processes to save time.
How EasyFiling Can Help
Dissolution can be the most challenging undertaking during the lifespan of an LLC. Business owners can dissolve their LLC with the help of EasyFiling as we will handle everything with utmost precision.
Preparing and filing Articles of Dissolution and Final Filings are some of the obligations we will settle for proper supervision and guidance throughout the entire period.
Why Should You Go For EasyFiling?
- Expert guidance tailored to South Carolina’s specific requirements.
- Hassle-free preparation and filing of dissolution documents.
- Support with tax filings, creditor notifications, and asset distribution.
- Transparent pricing and reliable service.
Book a free consultation with EasyFiling today to dissolve your LLC in South Carolina and focus on your next business venture with peace of mind.
Frequently Asked Questions (FAQs)
How long does it take to dissolve an LLC in South Carolina?
This is a question with a vague answer, as it is quite dependent and will vary from person to person, based on how quickly they can pay off their debts, file the necessary paperwork, and pay taxes. South Carolina’s Secretary of State usually takes a few days to process the articles of dissolution for online pleadings.
What happens if I don’t formally dissolve my LLC?
In such a case, you would be required to meet all the ongoing obligations of an operating LLC, which would include but would not be limited to, annual fees, reports, taxes, etc. A failure to meet those obligations can result in penalties and or legal issues, both of which are things you would want to avoid.
Can I reinstate my LLC after dissolution?
Yes, it is certainly possible, but there are some conditions. In order to reinstate your LLC you are required to fill out certain forms, pay a fee, as well as meet certain obligations. As always, confirm with the South Carolina Secretary of State’s office for more information.
Nabin Adhikari
