What do you, as a business owner, do when you want to close up shop? Unfortunately, you cannot simply stop the operations of your limited liability company (LLC) and walk away. Steps were taken to create the structure surrounding your business. Similarly, there are considerable requirements for dissolving an LLC under the law.
While many states have a specific LLC Act, Texas does not. Instead, you must comply with laws set forth in the Texas Business Organization Code (BOC).
Because these laws can be complex, it is always advisable to speak with an attorney who is thoroughly familiar with dissolution requirements under the BOC.
The business attorneys at Weisblatt Law Firm have the knowledge and experience necessary to help you dissolve your business. Contact them at (713) 666-1981 to schedule a consultation.
Closing Your Business
Reasons to Dissolve Your LLC
While some businesses seem to operate forever, many others have shorter life spans. The business environment can be volatile, and the circumstances surrounding each organization are unique.
For businesses organized as a limited liability corporation (LLC), the reasons for disbanding can be broad. They may include:
- Completion of the Business’s Goals: In some cases, LLCs are created to fulfill a specific purpose (selling properties, creating projects, etc.). Once the goals are reached, there may be no reason to remain in business.
- Arguments Between Members: Circumstances change, as do individuals’ beliefs and actions. If the members of an LLC are no longer in agreement over the direction of the business, the actions it should take, or how to disburse profits it may be time to shut down.
- Member Bankruptcy and/or Death: If an LLC is formed by a single person, the death or bankruptcy of that individual may signal the end of the organization. Additionally, LLCs with multiple members may have agreements in place that call for dissolution in light of certain circumstances.
- Product Issues: If an LLC is a manufacturer or distributor and its primary product is no longer in demand or, perhaps, has liability issues, it may be time to end the business. After all, if you cannot sell your product, you cannot operate profitably.
Other issues that may result in the need to disband an LLC include expiration dates that were decided upon when the business was formed, management conflicts, and even a decision to simply move on. Regardless of the reason, dissolution can be complicated, and the assistance of an experienced business lawyer is valuable.
Contact the attorneys at Weisblatt Law Firm at (713) 666-1981 for critical counsel.
Dissolving an LLC in Texas
Steps to Take Before Dissolution
Taking the time to do things the right way can save you both time and money in the end. That said, if you plan to shut down your LLC, you must begin a process commonly referred to as “winding up.” The BOC determined certain events that trigger a mandatory winding up process, though you can also engage in winding up voluntarily. For guidance on the specific steps of winding up your LLC, you should first refer to the organizational documents of your company, including a certificate of formation and operating agreement. If these documents were properly drafted, they should address how the LLC should be dissolved. Often, this requires a majority vote of the LLC members.
The winding up process is comprised of a series of tasks, each of which is important. These include:
- Notifying any claimants against the business: Communication is key, and informing those who have a claim against your business that you will be closing is a must-do.
- Defending or prosecuting any LLC legal claims: You do not want to have outstanding lawsuits standing in the way of closing your business.
- Taking inventory of all LLC property: When LLCs are disbanded, the property needs to be divided. It is important to know what you own and its value prior to dispersing it.
- Applying LLC property to satisfy any liabilities: Settling all liabilities is one of the first things you should do when ending a business. These can include paying creditors and contractors and settling outstanding loans.
- Distributing LLC property among members or selling the property: Members of the LLC are entitled to a predetermined portion of the assets. The percentages are likely set out in the organization’s incorporation papers.
You must also ensure that all final LLC taxes have been paid and ensure that your LLC is in good standing with the IRS and the Texas Comptroller. You must file a Request for Certificate of Account Status from the Comptroller and wait for it to be processed. You will then need to file a Certificate of Termination with the Texas Secretary of State with your Certificate of Account Status attached. These forms must state that you complied with all BOC requirements for winding up your LLC. Once your Certificate of Termination is processed, your business name will again be available for others to use as their own.
Officially dissolving your LLC is only one small part of shutting down a business.
You also need to terminate any leases, settle debts, liquidate assets, pay your employees, sell off inventory, and much more.
Some businesses end by filing for Chapter 7 bankruptcy if the LLC cannot afford to pay its debts. In any event, deciding to close an LLC is a critical decision that will require significant work on the part of the members in order to comply with the law and avoid any legal issues.
Satisfying each of the actions is the responsibility of the members and should be taken seriously.
How Long Does It Take to Dissolve an LLC in Texas?
This is an important question and one you will definitely want to know the answer to as you prepare to disband your business. The general timing, from the point you decide to terminate until the business is ultimately dissolved, may vary considerably from organization to organization. This is primarily because the scope of the winding up activities can be very different. Smaller organizations with little property, where all members are in agreement, may be able to move more quickly than a more complex business with considerable physical assets.
As mentioned, once the winding up is complete, a Certificate of Termination must be filed with the Texas Secretary of State. The timing for processing this filing is usually three to five days.
How Much Does It Cost to Close an LLC in Texas?
Once again, the cost to close an LLC in Texas can vary from business to business. Expenses specific to each organization may include:
- Legal fees (regarding defending or prosecuting existing lawsuits)
- Outstanding business debts
All of these must be satisfied when dissolving an LLC. The official filing cost to dissolve an LLC is $40.00. You will pay this when you file your Certificate of Termination.
How to Dissolve a Foreign LLC in Texas
Houston, Texas, is home to a vibrant business community, one that hosts many foreign LLCs. If you are a member of one and you wish to dissolve your LLC, you must obtain tax clearance from the Texas Department of Revenue. Contact the State Comptroller to request a Certificate of Account Status.
You need to prove that you have paid all state franchise taxes.
You will provide your tax clearance along with Form 608, Certificate of Withdrawal of Registration to the Secretary of State of Texas. Filing costs applied to for-profit organizations are $15, while not-for-profits pay $5.00. According to Texas Law, this form must be signed by an organizer or director of the business, depending upon the specific circumstances.
Find Out How A Houston Business Law Firm Can Help You
Contact Weisblatt Law Firm Today
Dissolving your LLC in the right way is critical for your finances and your future. This is far from a simple process, however, and it is always best to have the guidance and assistance of an experienced business attorney throughout the whole process.
The Weisblatt Law Firm stands ready to assist you with all of your business needs. Attorney Andrew Weisblatt, the firm’s founder, has helped clients during every stage of business – from formation to dissolution. Please call The Weisblatt Law Firm at (713) 666-1981 or contact our office online to discuss how we can assist your company.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel.