Unlike other states that may allow you to cancel a business in just a few steps, South Dakota requires several actions to dissolve an LLC legally, ensuring all statutory requirements are met.
Closing your LLC due to relocating, restructuring, or some other factors doesn’t mean you can ignore all legal requirements and hurry to erase or suspend your company’s name as it’s crucial to avoid potential risks, both financial and legal.
Here is a helpful guide to help you dissolve an LLC in South Dakota in a stepwise process while ensuring compliance with state laws to avoid possible issues in the future.
1. Review Your Operating Agreement
The first step for approaching the dissolution of an LLC is to locate and go through the company’s operating agreement if it exists. This is because the Operating Agreement details how the company will function and provides bylaws on how the company will be dissolved in detail. Most operating agreements include provisions such as:
- How members should approve the dissolution (e.g., unanimous or majority vote).
- Steps to notify the members, creditors, and other important people.
- How and when the residues after liabilities have been settled, will be sporadically distributed for future use.
However, if the LLC does not have such an agreement, it is required to respect the laws on LLCs tailored in Chapter 47-34A of The South Dakota Codified Laws. Going through these laws will guarantee you that your dissolution processes are legally compliant.
2. Obtain Member Approval
This usually involves a vote at a meeting or signing a consent form, as the members are required to agree to the dissolution of the LLC formally.
Document the approval in writing through a resolution or meeting minutes. This written documentation serves as proof of compliance and can protect you in case of future disputes or audits.
However, even in single-member LLCs where the decision is made by the owner alone, it is important that the decision is duly recorded in writing.
3. File Articles of Dissolution
The filing of Articles of Dissolution with the South Dakota Secretary of State is a necessary step in the process of concluding your LLC’s existence. Do the following:
Get the Form: Locate the Articles of Dissolution form on the website of the South Dakota Secretary of State. This form serves the purpose of informing the state of the LLC about its intention to wind up its business.
Fill up the Form: Some of the information you’ll be required to provide include:
- Name of the LLC as registered with the State.
- The date of deregistration or the effective date of dissolution is planned for a later date.
- Reasons for deregistering the LLC, if applicable.
- The form filler’s contact details.
Complete form submission: The form can be submitted electronically, delivered, or mailed. Please remember to add a payment of $10 as a filing fee. Visit the website of the ‘South Dakota Secretary of State’ for any changes in the filing fee and method of payment.
The submission address is:
Office of the Secretary of State
500 E. Capitol Ave.
Pierre, SD 57501
The time it takes to process an application depends on how the application was submitted. Online applications tend to be acted on much quicker than those submitted by post.
4. Resolve Outstanding Obligations
To fully terminate your LLC, it is required to pay off all the pending debts: This means you will need to:
Pay-Off Creditors: These are the creditors who will need to be paid off. Ensure that after the debts are paid off you have written confirmation of this.
File Tax Returns: Ensure that your various tax obligations including federal and state tax returns are filed. Formal accept this being your last signing by marking the relevant checkboxes in the requisite returns. Make sure all payroll, sales, and other taxes are settled.
Proceed To Cancel Business Registrations: This is essential as the relevant state and local authorities need to be notified in case of conjunctions. Otherwise, unnecessary problems and costs may arise later on.
5. Notify Stakeholders
It is crucial for all the people concerned to know about the dissolution of your LLC so that there are no claims that may interfere with your business. Some of the important stakeholders to notify include:
Creditors: Write to your creditors to inform them about your LLC’s dissolution. Tell them how they can claim against the business and the period they can do so.
Employees: For Members LLC, if employees exist, final paychecks should be issued together with employment documents where required, such as tax forms.
Clients and Vendors: Clients and vendors need to be contacted to state that the business in general is closed. Most leftover money owed to vendors should be paid out and if a customer owes money then and it is against the last works done with him, then it should be done.
6. Distribute Remaining Assets
The next thing that you can do is to allocate the remaining assets of the LLC amongst its members. The allocation should be done according to the provisions of your operating agreement.
In the absence of an operating agreement, members representing the state of South Dakota will follow the law governing the distribution process which is usually determined by the percentage of ownership of each member.
Assets can be cash, property, and other business assets. Make sure that these distributions are fully documented for tax and legal purposes.
7. Retain Business Records
You also have to keep all business records for up to five to seven years after the LLC has been dissolved. These documents include:
- Articles of Dissolution.
- Final tax returns and the relevant documentation.
- Proof of debt settlements.
- Records of asset distributions.
Proper organization of these documents can save you from unpleasant audits, legal disputes, and claims in the future.
8. Close Your Bank Accounts
When all the business transactions are done, it is advisable to close your LLC’s business bank accounts and associated credit lines to prevent further transacting under the name of the LLC.
Mistakes to Avoid When Dissolving An LLC
Mistakes can sometimes be inevitable, however, there are a few mistakes to avoid in order to ensure a seamless process when dissolving an LLC.
Neglecting to Inform Some Creditors: When certain creditors are not informed this can lead to unfinished claims and litigations.
Some Taxes Shouldn’t Be Avoided: Be sure to pay the final taxes owed to avoid being penalized by the IRS or the South Dakota Department of Revenue.
Some Documents Should Not Be Left Out: Failing to submit the articles of dissolution means your company’s information is still present in the state’s files and hence you will continue incurring charges and fines from the state.
Every Member Should Ensure Fair Distribution: Assets that haven’t been paid back should be divided according or how the constitution or the governing document states to ensure no confrontation between the members.
How EasyFiling Can Help
Those who may be unfamiliar with the rules set in the state by the dos and don’ts may find it difficult and time-consuming to fully dissolve an LLC and complete the task, this is where easy filing comes to the rescue.
We can offer you support on all aspects of the dissolution process, guarantee all legal requirements are met, and aid you in saving money. Here is how we go about doing that:
Preparation of Articles of Dissolution: We handle the preparation and filing of your Articles of Dissolution with the South Dakota Secretary of State, ensuring all information is accurate and complete.
Compliance Review: We analyze the responsibilities of your LLC, be it the pending taxes, debts, and licenses, in order to permit a hassle-free dissolution.
Stakeholder Notifications: We help you prepare notification letters for creditors, employees, and any other interested parties so that they are appropriately notified.
Expert Guidance: Our professionals ensure that they deal personally with your LLC depending on the requirements of your company.
With EasyFiling, you do not have to bother with compliance and paperwork while concentrating on your next business. Book a free consultation today to dissolve an LLC in South Dakota.
Nabin Adhikari
