To dissolve an LLC in Texas you must follow a systematic and precise set of rules and procedures that will protect you in the future. Whether you are winding up a business that no longer serves you or you’re moving into a new venture, understanding the closing process is vital as it is the future that matters most. In case you have access to a proper Texas Limited Liability Company Dissolution procedure, you won’t have to worry.
An LLC can finally be closed after its administrative, financial, and legal issues have been properly taken care of and every single Texas statute prohibition is complied with; however, many professionals highlight that the process is long and tedious and there is a set of guidelines to follow for effective performance.
This guide will help you clarify how to go about every single step to dissolve an LLC in Texas.
1. Review Your Operating Agreement
First of all, confirm that your order comes to close the Texas LLC according to the operating agreement you have made. This agreement archives the procedures for relicensing the company including:
- The voting requirements for approval of dissolution.
- The tasks that have to be accomplished by every single member of the company along with their duties.
- How the LLC’s debts and other factors shall be dealt with.
If your operating agreement does not provide specific instructions, use the default rules set out in the Texas Business Organizations Code (BOC). Familiarizing yourself with these rules also guarantees that you comply with provisions and avoid conflicts among members during liquidation.
2. Vote to Dissolve the LLC
Organize a meeting of the members of the LLC to officially vote on the decision to dissolve the LLC. Note the decision in meeting minutes and ensure that the same conforms to the voting rules contained in your operating agreement or the Texas BOC.
This agrees with formal approval and such a decision becomes the basis for the whole set of actions taken. It ensures that any written matter concerning this decision may become useful when required during legal procedures or when filing tax returns.
3. File a Certificate of Termination
The second step is to file a Certificate of Termination with the Texas Secretary of State. Here’s what you have to do:
Download the Form: Download Form 651 (Certificate Of Termination Of A Domestic Entity) from the Texas Secretary Of State website.
Fill Out the Form: Write down the information requested, specifically the name of the LLC, the dissolution date, and the statement that all debts and liabilities are settled. Fill out the form with care, since mistakes may cause further delays in processing your petition.
Submit the Form: Submit the completed form via the Internet, through the post, or directly. They charge a fee of $40 for filing the documents, but further fees may arise from expedited processing. For those filing via post, a cover letter is recommended in order to avoid mix-ups during submission.
4. Clear All Financial Obligations
All debts, taxes, and liabilities should be settled before the dissolution of the LLC. Always remember to do the following:
- Settling outstanding debts with creditors.
- Paying any remaining salaries or benefits to employees.
- Filing and paying final state and federal taxes.
In case your documentations require you to write a blog, you may as well be directed to seek a copy of your account status from the Texas Comptroller’s office so that it helps you to make it easy.
It is usually a requirement when closing an LLC with the state that this document is obtained. If your LLC has many tax accounts, ensure they are all properly closed up to avoid complications.
5. Distribute remaining assets
If any other assets are left to the members, they will divide them according to the instructions provided in the operating agreement. If such provisions are absent, distribution will, however, be dependent on the percentage of ownership that each member possesses
Payouts of this nature are quite sensitive, and so due care should be taken that they are accurately stated and documented. This step may also entail the sale of assets that are not required and the proceeds be divided among members.
6. Cancel Permits, Licenses, and Business Names
To fully dissolve the LLC, cancel any business permits, licenses, or fictitious business names associated with the LLC. Contact the relevant state and local agencies to ensure everything is properly terminated. For example:
- Cancel sales tax permits with the Texas Comptroller.
- Notify local governments about the cancellation of zoning permits or other local licenses.
Disapproval of disapproval to cancel these permits might lead to unnecessary fees or liabilities in the future.
7. Notify Stakeholders
The last step to be taken is to ensure the dissolution is sent to everyone who matters including clients and partners. You should notify all of your business associates in order to protect your business relationships.
Let the clients know as to what is happening with their pending orders or contracts with your business and provide them a contact number in case they want any follow-up. You don’t want your customers to become annoyed and angry over the misunderstanding and in order to resolve that, try to be as open as possible.
8. Retain Business Records
It is important to retain copies of all relevant documents to the LLC for not less than five years. Such documentation could include:
- Financial Statements
- Tax Returns
- Minutes of Meetings of Members
- Certificate of Termination
Accuracy of accounts and keeping of records is of great importance especially when former members or shareholders have questions or issues regarding the company. These documents should be kept in a safe but easily retrievable position within the firm.
Additional Considerations
Legal Issues: If your LLC hasn’t dealt with the outstanding legal issues or disputes then it would be worthy to talk with the business attorney regarding these aspects before going forward with the dissolution.
Tax: The Members of the LLC may be liable for taxes when the LLC is dissolved. Ask your tax professional about potential tax liabilities post-dissolution.
Notice to Employees: If there are employees in the LLC the federal and state labor laws on the final payment and termination benefits have to be adhered to. Set expectations with employees about when the dissolution will occur.
How EasyFiling Can Help
Starting an LLC is relatively simple. However, the process of dissolving an LLC can be more difficult than expected for some. EasyFiling! we can provide our customers with a simpler way to dissolve their LLCs without much hassle.
In addition, EasyFiling helps to deal with cumbersome paperwork and ensure compliance with state regulations. Various tasks are streamlined, hence cutting down time and costs. About to set off on your next journey? Don’t worry, EasyFiling has you covered. Book a free consultation today.
Frequently Asked Questions (FAQs)
How long does it take to dissolve an LLC in Texas?
It doesn’t take much to dissolve an LLC in Texas. However, the process does have a specific succession of steps that have to be completed. All people need to do is file their termination certificate and the association of ‘active’ status will be changed to ‘Inactive’ within 5-10 working days. If a person does not wish to wait this long, there is a provision to enable this within a couple of days, even hours, if preferred.
Is there a penalty for not dissolving an inactive LLC?
Yes. If a person starts an LLC and then does nothing to dissolve it, this also affects their tax filings further down the road.
Can I dissolve my LLC online?
The answer is yes, EasyFiling will give you access to file it online through their SOSDirect portal with the Secretary of State in Texas.
Is it essential to inform the IRS when closing my LLC?
Indeed, it is necessary to submit the last federal tax return, such that is the last return, and also to cancel the EIN account with the IRS.
What happens to my LLC’s debts when it begins to dissolve?
Before members loosely receive the remaining assets, however, all outstanding debts have to be paid off. When a company fails to pay its debts, the members may have to seek out a legal expert for assistance.
If I close my LLC, can I get it back?
No, in Texas once an LLC is closed, there is no opening again. Instead, if you wish to continue conducting business, then you would have to open up a new LLC.
Nabin Adhikari
