Dissolving a Limited Liability Company in Washington, also known as an LLC, is easy if one knows how to go about it. Otherwise, one can panic.
Irrespective of your reasons for closing your business, be it that it is no longer making sense to carry on, you have achieved its intended purpose, or other circumstances, you must observe the right protocols of the law to protect yourself from future claims.
In this piece, you will be guided through the whole process to dissolve an LLC in Washington while observing the do’s and don’ts of the process.
1. Vote to Dissolve the LLC
- LLC has to have members or owners who agree to dissolve the LLC by voting.
- Where there are multiple members, the operating agreement will state how dissolution can be done and what percentage of member approval is required.
- Though a single majority is sufficient, the operating agreement may stipulate that more votes are needed.
- The single-member LLC holder is at liberty to make decisions regarding its dissolution even if it’s such an important decision.
- Such decisions can be captured in an authorizing resolution or minutes of the meeting that fully detail the minutes.
2. Settle Outstanding Debts and Liabilities
First of all, you need to be careful while settling off outstanding debts and ensuring there are no liabilities left unattended. This is an important step because creditors and other parties may have claims against the LLC. It may make you liable and may result in a lot of legal fuss and financial troubles in the future.
Key Tasks to Complete:
Pay creditors: Take note to pay any business loans, unpaid invoices, and bills that need to be settled.
Close contracts: Do the same for the other parties named in the leases, vendor agreements, and clients. Notify them of the intent to close such contracts or assign obligations for closure or transfer.
Resolve employee obligations: If there are LLC employees, then ensure full compliance with all the last payroll obligations. This includes fulfilling final wages, vacation times, and severance pay.
Distribute remaining assets: This property and money remaining after the debts are settled should be divided among the members of the LLC according to the operating agreement, or in the absence of such an agreement, it shall be distributed according to the law of the state of Washington.
These financial and legal obligations should be handled properly so that when the LLC is dissolved; there are no outstanding obligations left with the members or creditors.
3. Submit Articles of Dissolution
Make sure you file The Articles of Dissolution after making the final payments and Equalizing the debts of the LLC. You can now submit a request to the Washington Secretary of State’s office to dissolve the LLC permanently. By dissolving the entity all liabilities are settled and the structure is released from the state registry. Simply put, it’s the last step left.
Required Information:
- The LLC name and Unified Business Identifier (UBI) number
- The date on which the LLC was dissolved
- A statement that all debts, taxes, and liabilities have been paid (or that there are no such obligations)
- Signature of an authorized person from the LLC, such as a member or manager
One of the ways to do this is by accessing their website or printing and mailing them the papers. Don’t forget to add the fee of $30 if filing electronically or $40 on paper to submit the Application Articles. Lastly, the details of your submission will be noted in their records.
4. Revoke Licenses and Permits of the Company
Dissolving your LLC calls for the halting of further business activities because your LLC will no longer exist. In this essence, once you file for dissolution, it would help to also remember to cancel all business permits and licenses that relate to your LLC.
This will protect you from having to pay taxes or fees in the future concerning these licenses. Such permits and licenses include the following, however, there are many more:
State Business License: You must notify the Washington Department of Revenue and close your state business license account.
Local Permits: When it comes to canceling all permits, the basic requirement is determined by the location of the LLC. This means that your city or county of residence may also have issued business licenses or a permit that is still in force and must also be canceled.
Sales Tax Permits: If you were registered sales tax collectors for the LLC, you are advised to close your sales tax account with the Washington Department of Revenue.
Special Licenses: If your LLC requires any specific professional licenses (such as for health care, real estate, or food service), contact the relevant agencies to cancel those as well.
If you have no desire to risk incurring fines or enforcement action for legal noncompliance in your new business entity, canceling all these registrations will allow you to avoid the irretrievable costs and risks of notices of violation and legal action.
5. Inform IRS and State Tax Authorities
Even after legally dissolving your LLC in Washington State, it is your responsibility to report to the IRS and the Washington Department of Revenue.
Internal Revenue Service (IRS)
- First and foremost fulfill your tax obligations. A federal tax return needs to be filed.
- Similarly, in the event that the formed LLC has employees, submit to the IRS Form 941, Employer’s Quarterly Federal Tax Return, and also Form 940, Federal Unemployment Tax Return while closing the company.
- If Your Washington LLC has been taxed based on Corporations then it is highly likely that you are liable to complete Corporate Income Tax Return filing tax form 1120.
But before proceeding, remember to return any International Obligation Assets Liability (An IRS form requires restitution of assets outside the US).
Department of Revenue:
- Close your tax account: Cancel your tax registration at the Department of Revenue if applicable on all active tax registrations like sales tax registration and business occupation tax.
- File final state tax returns: File all due forms with separate completion claiming all states owed taxes.
It would be prudent to fulfill all obligations to the IRS and all state tax authorities to avoid making your LLC responsible for tax obligations after closing.
6. Distribute Remaining Assets to Members
After debts and other obligations are settled, and all logistical matters are taken care of, if there are remaining assets of the LLC, they should be given to the members.
The course of action for the distribution of the assets is determined depending on the provisions that the LLC’s operating agreement may contain in terms of how what remains or gains would be shared. In the absence of an operating agreement, the distribution will be done according to Washington state legislation.
Generally, distributions of assets are made according to the percentage of ownership or members’ agreements. This entails the following for example:
- Dividing cash or bank account balances
- Allocating real estate, equipment, or other property owned by the LLC
- Distributing intellectual property or other intangible assets
7. Set Up a Filing System
After the dissolution, the dissolution of your LLC and other business documents should be easily traceable. Such documents may be needed for reference or if any disagreements or claims arise.
You should retain the following:
- A copy of the Articles of Dissolution
- Tax returns and tax-related documents for several years
- Documentation related to the settlement of debts, including receipts, invoices, and contracts
- Records of the final distribution of assets among LLC members
In general, the above records should be retained for a period not less than 5-7 years after dissolution.
8. Pay Differing Taxes And Close Accounts Out
The final step in the process of dissolving a business in Washington is to ensure that no accounts remain. Which means:
Bank accounts: Any business checking accounts, savings, or business already tied in the LLC should be closed.
Credit accounts: Ensure all the credit and credit cards owned in the LLC name have been canceled and fully paid for.
Business-related accounts: Close any online merchant accounts, payment processors, or other business accounts that were opened in the LLC’s name.
So this measure makes sure that all debts of your LLC are fully paid.
How Easyfiling can assist you?
Easyfiling can make the LLC dissolving process a lot easier in Washington State by assisting in the following areas:
Articles of Dissolution: We assist in filing your Articles of Dissolution with the Washington Secretary of State, so everything is filed as legally required.
Licenses and Permits Cancellations: Easyfiling assists you in canceling every business license and permit with the correct authorities to help you avoid any excessive expenses.
Tax Notifications: We ensure that the IRS and the Washington Department of Revenue are informed about the dissolution of your LLC and also offer help with the last tax returns.
Document Tracking: Easyfiling makes it easy for you to locate and retrieve those that deal with your dissolution by indexing all the relevant documents.
Help and Instructions: Our staff is available to walk you through every step of the process, including compliance with various laws and appropriate disposal of assets.
With Easyfiling, you will not have to worry about the task at hand as every aspect of dissolving your LLC in Washington will be handled perfectly.
Book a free consultation today with Easyfiling to dissolve an LLC in Washington.
Frequently Asked Questions (FAQs)
How do I dissolve my LLC in Washington?
To dissolve your LLC in Washington, you will need to vote for dissolution, discharge remaining obligations, submit Articles Of Dissolution, cancel licenses and permits, and inform the IRS and tax offices.
What is the cost of filing Articles of Dissolution in Washington?
Inscribing Articles of Dissolution costs $30 when done on the web, and $40 when done on paper instruments.
Do I need to pay off all debts before dissolving my LLC?
The dissolution of an institution can be commenced after all the debts have been cleared including unpaid invoices, business loans, and obligations to employees.
How do I distribute the remaining assets after dissolving my LLC?
In the absence of an operating agreement, any remaining assets are to be distributed according to the provision of Washington law which is most often on a proportionate basis of ownership.
How long should I keep dissolution records?
Dissolution records together with tax documents and asset distribution documents should be kept for a period of 5 to 7 years after the LLC is dissolved.
Nabin Adhikari
