Perhaps you formed a limited liability company (LLC) to do business in Texas, but later realized that being a business owner is not for you. Similarly, you may have started the LLC with some partners, but later realized that you and your partners can't seem to work together. Whatever the reason, if you want to dissolve your Texas LLC, there are a number of important steps that you will need to take.
What Does it Mean to Dissolve an LLC in Texas?
Dissolving an LLC officially ends its existence. What’s more, it puts the LLC’s owners/members beyond the reach of any remaining creditors and claimants.
The process by which a Texas LLC is dissolved is governed by state law. This process may be initiated voluntarily by a vote of the LLC's members, or involuntarily by the Secretary of State due to your failure to file an annual report, for example.
Texas differs from other states, however, in that it has no separate statute governing the formation, operation, and dissolution of its LLCs. Rather, Texas LLCs are primarily governed by the Texas Business Organization Code (BOC), which governs other business entities as well.
The Process to Dissolve an LLC in Texas
Before beginning the process to dissolve your Texas LLC, you should first consult with its Operating Agreement and Certificate of Formation. In many cases, these internal documents will specify the exact procedure you will need to follow.
Your internal documents may, for example, require the members of your LLC to vote on a resolution to dissolve the business, and/or require that a certain percentage of its members vote in favor of the resolution. This may in turn require you to set the vote on a specific date and to provide all members with a specified amount of advance notice.
Make sure that you follow any such procedural requirements. Furthermore, you should document the outcome of these procedures in writing, either on a consent form or in the official minutes of the relevant meeting. You should also know that under the Texas BOC, a majority vote in favor of a resolution to dissolve your LLC is all of the authority needed to dissolve a Texas LLC, regardless of what its internal documents say.
Cessation of Business (Winding Up)
In many ways, dissolving a Texas LLC is similar to starting one. Technically, it is as easy as going to the Secretary of State's website and filing a Certificate of Termination, which can be completed quickly and easily. Currently in Texas, the fee for filing a Certificate of Termination is $40.
However, before you file a Certificate of Termination with the Secretary of State, you will need to wind up your LLC. Winding up your LLC will require you to cease carrying on business (except to the extent necessary to wind up) and to fulfill the following BOC requirements:
- Provide written notice to every known person or entity with a claim against the LLC;
- Gather and liquidate all assets owned by the LLC that will not be distributed to its members;
- Prosecute or defend any lawsuit initiated by or filed against the LLC;
- Satisfy all of the LLCs obligations and liabilities, or make provisions to do so, including those owed to its members (with the exception of distributions);
- Distribute the LLCs remaining assets to its members, according to their individual rights and interest in the LLC; and
- Perform any other tasks required to wind up your LLC's business and financial affairs.
Certificate Account Status & Certificate of Dissolution
After you have finished winding up your LLC, you will then need to obtain a Certificate of Account Status to verify that you have satisfied all of your LLC's tax obligations and that it is in good standing with the state. This document can be obtained from the Texas Comptroller of Public Accounts by filing Comptroller's Form 05-359.
You will need the Certificate of Account Status to file a Certificate of Termination (Form 651) with the Secretary of State to officially terminate your LLC. The Certificate of Account Status will need to be attached to the Certificate of Termination, which must specify:
- The name of your LLC;
- The name and address of each of your LLC's managers (for member-managed LLCs), or the name and address of at least one of its managers (for manager-managed LLCs);
- The file number your LLC was assigned by the Secretary of State;
- The circumstances that precipitated the winding up of your LLC (a majority vote of its members, for example)
- An affirmation that your LLC has fulfilled all requirements necessary under the BOC.
The date upon which the termination of your LLC will become
effective, which can be either:
- The date upon which you filed the Certificate of Termination;
- 90 days from the date upon which you signed the Certificate of Termination; or
- The date upon which a specified future event occurs.
Consult With An Experienced Texas Business Attorney
Regardless of the reason why your LLC needs to be resolved, it is important to be aware of the correct procedure in order to protect the LLC and its members from extra expenses, liability, and conflict. This is why it is important to consult with an experienced Texas Business Consultant.
Among other things, an experienced business attorney can help you do the following when dissolving your Texas LLC:
- Determine if you need to file a final federal or state tax return for your LLC;
- Evaluate any unresolved contracts, loans, and obligations your LLC may have;
- Determine what you need to do to close your LLC's bank accounts; and
- Distribute assets and funds to your LLC's members.
For help with dissolving a Texas LLC, call us today to arrange a free consultation with a knowledgeable and experienced Texas business attorney.