Dissolving an LLC in Texas involves officially ending its legal existence by following a structured process. Here’s what you need to do:
- Decide to dissolve: Review your LLC’s operating agreement to understand voting requirements. Document the decision with a formal resolution.
- Settle debts and taxes: Pay off outstanding debts, notify creditors, and obtain a Certificate of Account Status from the Texas Comptroller to confirm all taxes are paid.
- File required forms: Submit the Certificate of Termination (Form 651) for domestic LLCs or the appropriate form for foreign LLCs to the Texas Secretary of State, along with the filing fee.
- Distribute remaining assets: After settling liabilities, distribute any remaining assets to members as outlined in your operating agreement.
- Notify and cancel: Inform creditors, clients, and vendors of the closure. Cancel licenses, permits, and business accounts.
Quick Overview of Forms and Fees:
| Entity Type | Form Required | Filing Fee | Additional Requirements |
|---|---|---|---|
| Domestic LLC | Certificate of Termination (Form 651) | $40 | Certificate of Account Status |
| Foreign LLC (Active) | Certificate of Withdrawal (Form 608) | $15 | Certificate of Account Status |
| Foreign LLC (Dissolved) | Termination of Registration (Form 612) | $15 | Certificate of Account Status + Home State Proof |
Failing to follow these steps can result in ongoing fees, penalties, or personal liability. By completing the process properly, you can close your LLC smoothly and avoid future complications.
Legal Requirements for LLC Dissolution
If you’re planning to dissolve your LLC in Texas, it’s crucial to follow the steps outlined in the Texas Business Organizations Code (BOC). This law governs the dissolution process and requires that a specific event triggers the "winding up" phase. During this phase, the LLC ceases regular operations and focuses on settling debts, notifying creditors, and distributing any remaining assets.
The BOC specifies essential tasks during winding up, such as notifying creditors, distributing assets, and settling liabilities. Once these steps are completed, you’ll need to obtain a Certificate of Account Status from the Texas Comptroller and file a Certificate of Termination with the Secretary of State. Additionally, review your LLC’s operating agreement to ensure you’re following any internal procedures for dissolution.
Check Your LLC Operating Agreement
Before starting the dissolution process, take a close look at your operating agreement. This document often outlines the specific steps required to dissolve the LLC, including the type of member vote needed. Some agreements call for unanimous consent, while others allow a simple majority. It’s essential to follow these guidelines; failing to do so could make the dissolution invalid.
If your LLC doesn’t have an operating agreement or if it doesn’t address dissolution, Texas law will dictate the required steps.
Texas Domestic vs. Foreign LLCs
The dissolution process differs depending on whether your LLC is domestic or foreign. A domestic LLC is formed in Texas, while a foreign LLC is established in another state but registered to do business in Texas.
- Domestic LLCs: You’ll need to file a Certificate of Termination of a Domestic Entity (Form 651) with a $40 filing fee. A Certificate of Account Status from the Texas Comptroller must also be attached.
- Foreign LLCs (Still Active in Home State): File a Certificate of Withdrawal of Registration (Form 608) with a $15 filing fee. A Certificate of Account Status must also be included.
- Foreign LLCs (Already Dissolved in Home State): File a Termination of Registration (Form 612) with a $15 filing fee. You’ll also need to provide proof of dissolution from the home state.
| Entity Type | Form Required | Filing Fee | Additional Requirements |
|---|---|---|---|
| Domestic LLC | Certificate of Termination (Form 651) | $40 | Valid Account Status |
| Foreign LLC (Still Active) | Certificate of Withdrawal (Form 608) | $15 | Valid Account Status |
| Foreign LLC (Dissolved) | Termination of Registration (Form 612) | $15 | Valid Account Status plus proof of home state dissolution |
For both domestic and foreign LLCs, you must obtain a Certificate of Account Status for Dissolution/Termination from the Texas Comptroller using Comptroller Form 05-359. This certificate must remain valid through the effective date of your termination filing.
Making the Internal Decision to Dissolve
Once you’ve reviewed your operating agreement, the next step is to formally decide to dissolve your LLC. This decision requires the consent of the members and must be documented properly to avoid potential disputes down the road. After reaching this decision, it’s important to hold a formal meeting and record the resolution.
Hold a Member or Board Meeting
The process begins with securing member consent. If your operating agreement outlines specific voting requirements, you’ll need to follow those rules exactly. This might include holding a formal meeting, giving advance notice to all members, or adhering to other procedures. If the agreement doesn’t specify, Texas law requires the consent of the majority of members. For LLCs without members, all managers must agree to the dissolution.
Plan a formal meeting to discuss the decision. During this session, provide a clear explanation of why dissolution is being considered, explore any alternatives, and allow members to express their concerns or ask questions. Key topics should include the financial impact, the timeline for winding down operations, and how remaining assets will be distributed.
Document the Dissolution Decision
After the meeting, it’s essential to document the decision with detailed records. The decision to dissolve must be formalized through a resolution passed by the LLC members. Record the meeting minutes, including the vote count, member attendance, and the exact wording of the resolution. If any members were absent, note whether they provided written consent or used proxy votes.
For unanimous decisions, you may opt for a written consent document signed by all members instead of holding a formal meeting. This can save time when everyone is in agreement.
Properly documenting this decision ensures it aligns with your LLC’s operating agreement and state laws. Keep these records as part of your LLC’s permanent files. They may be required when filing dissolution paperwork with the Texas Secretary of State or in case of future disputes.
Be sure to store both physical and digital copies of the dissolution records for safekeeping.
Pay Off Debts and Handle Tax Obligations
Before dissolving your LLC, it’s crucial to address all outstanding debts and tax responsibilities. Taking care of these obligations ensures you won’t face unexpected liabilities down the road.
Start by creating a detailed list of all liabilities, including loans, credit lines, accounts payable, and other obligations. Include the amounts owed, creditor details, and due dates. Keeping this information organized helps you avoid missing any debts during the dissolution process.
Next, notify all creditors about your LLC’s planned dissolution. Send these notifications in writing to provide a clear record and set a deadline for creditors to submit claims. This step also limits the time creditors have to pursue collection efforts.
When you receive creditor claims, review them carefully and treat all creditors equally to avoid disputes. Document every payment, notification, and settlement to maintain accurate records. Use available cash to pay off debts, and only sell assets if absolutely necessary. If your debts exceed your resources, consider negotiating with creditors to settle for reduced amounts.
Get a Certificate of Account Status for Dissolution
Once your debts are settled, you’ll need to confirm your tax compliance. In Texas, the Comptroller requires a Certificate of Account Status (COAS) to prove your LLC has paid all state taxes before it can be legally terminated. To obtain this certificate, you’ll need to file a franchise tax report, submit a signed information report, and complete a final franchise tax report for the year in which you’re filing for termination. Keep in mind that the certificate is valid only through December 31 of the year it’s issued, so timing is important.
You can file the necessary franchise tax reports using Webfile or Form 05-359. Make sure to have your taxpayer ID and Webfile (XT) number available. If you need assistance, you can contact the Comptroller’s office at 1-800-442-3453.
Certain LLCs may need to file a printed request for the COAS. This applies to entities that are part of a combined group, have been active in franchise tax for less than a year, are undergoing an active audit, or have unpaid franchise tax filings from before January 1, 1992.
Distribute Remaining Assets to Members
After settling debts and obtaining tax clearance, the final step is to distribute the remaining assets of the LLC. This process should follow the terms outlined in your operating agreement and comply with Texas state law. Carefully review your operating agreement to determine how assets should be divided. Typically, distributions are based on ownership percentages or members’ capital contributions. If the agreement doesn’t specify a method, Texas state law will dictate the division of assets.
Document every distribution and have recipients sign off on them. Keep detailed records of these transactions to show that the process was handled fairly and according to legal requirements.
It’s important to note that distributing assets can have tax consequences for both the LLC and its members. Consult a tax professional to understand any potential tax impacts before proceeding.
Never distribute assets to members until all debts are fully paid and accounts are closed. Following this order is not only a legal requirement but also protects you and other members from future claims by creditors. Once all liabilities are resolved and tax obligations are met, you can confidently distribute the remaining assets as outlined in your operating agreement.
File the Certificate of Termination
To officially dissolve your LLC in Texas, you need to file the Certificate of Termination with the Texas Secretary of State. This filing is essential – it cancels your LLC’s certificate of formation and confirms its legal dissolution.
Once the Certificate of Termination is processed, your LLC will no longer exist as a legal entity in Texas. Before submitting this document, make sure you’ve wrapped up all winding-up activities. This includes paying off any debts, addressing tax obligations, and distributing remaining assets to members. The Secretary of State requires proof that these steps are complete before accepting your filing. After confirming these tasks, you can choose a filing method and gather the necessary paperwork.
Filing Methods and Costs
The Texas Secretary of State provides several ways to submit your Certificate of Termination. The filing fee is $40, regardless of the method chosen.
- Online filing: This is the quickest and most convenient option. You can complete Form 651 directly on the Secretary of State’s website and receive immediate confirmation of your submission. Online filing also reduces errors and processing delays caused by incomplete forms.
- Mail filing: If you prefer offline methods, you can mail your completed form in duplicate, along with the $40 fee and the required Certificate of Account Status, to the Secretary of State’s office. Keep in mind that mail processing takes longer than online submissions, so plan accordingly.
- Fax filing: This option offers a balance between speed and paper filing. While you can send your documents quickly, you’ll need to arrange payment separately since fax submissions don’t allow for cash or checks.
- In-person filing: If you need immediate assistance or have specific questions, you can visit the Secretary of State’s office. The lobby is open Monday through Friday, from 9:00 A.M. to 4:00 P.M. Central Time, for walk-in service.
Documents You Need to File
Once you’ve chosen a filing method, ensure all required documents are ready to go. Proper preparation will help avoid delays in processing your Certificate of Termination.
- Form 651: This is the official Certificate of Termination form. You’ll need to provide your LLC’s exact legal name, the original file number, and the names and addresses of each governing member.
- Reason for dissolution: Indicate why your LLC is being dissolved. For most voluntary terminations, you’ll select "Voluntary Dissolution & Wind Up", unless your operating agreement specifies a particular end date or event.
- Compliance confirmation: Confirm that all winding-up activities are complete. This includes ceasing operations, notifying creditors, and settling any liabilities.
- Effective dissolution date: Decide when the dissolution should take effect. Options include the date of filing, a specific date within 90 days of filing, or upon the occurrence of a specified event within that same timeframe.
Finally, an authorized person – someone legally allowed to act on behalf of your LLC – must sign the Certificate of Termination. If you’re filing by mail, include Payment Form 807 along with your $40 fee. Always keep copies of all documents for your records in case any issues arise later.
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Notify Others and Cancel Business Obligations
When closing your LLC, it’s crucial to inform everyone involved. This step minimizes confusion, ensures creditors and other parties can address any unsettled matters, and helps protect you from legal complications. From notifying stakeholders to canceling licenses and accounts, here’s what you need to know.
Inform Creditors, Clients, and Vendors
Start by notifying creditors about your LLC’s closure. Send certified letters to all known creditors, clearly stating your LLC’s legal name, the dissolution date, and instructions for submitting claims. Include a 30-day deadline for filing claims and keep detailed records of all correspondence, such as certified mail receipts and delivery confirmations.
Next, reach out to suppliers, vendors, and customers – especially those with active contracts, subscriptions, or outstanding invoices. This ensures any remaining obligations, like prepayments or services, are properly resolved. If your LLC has employees, provide them with adequate notice of the closure and fulfill all final payroll responsibilities, as required by Texas law.
Once you’ve notified everyone, move on to canceling your licenses, permits, and accounts.
Cancel Licenses, Permits, and Accounts
Canceling your LLC’s licenses and permits is a key step to avoid unnecessary fees or liabilities down the road. Start by canceling your sales tax permit with the Texas Comptroller, and file a final sales tax return for your last reporting period. Be aware that taxes may apply to any items purchased tax-free for resale but later used personally or given away.
Next, cancel local permits and federal registrations promptly, as requirements vary depending on the jurisdiction.
Close all business bank accounts after the final transactions have cleared. Review your bank’s policies for any closure notifications or fees. Additionally, terminate any active contracts or agreements, such as office leases, equipment rentals, insurance policies, or vendor contracts, to ensure no lingering obligations remain.
If your LLC is registered as a foreign entity in other states, withdraw those registrations to avoid additional filing requirements or penalties. Be sure to document all cancellations for your records.
How BusinessAnywhere Helps with LLC Dissolution
Once you’ve tackled the legal and financial aspects of dissolving your LLC, there are still logistical tasks to handle. BusinessAnywhere steps in to make these final steps smoother with tools designed to integrate seamlessly into your dissolution process.
Wrapping up an LLC involves managing a mountain of documents, staying on top of deadlines, and maintaining clear communication. BusinessAnywhere simplifies these tasks, keeping everything organized and ensuring compliance along the way.
Simplified Document Management
Dealing with dissolution paperwork can quickly become overwhelming. BusinessAnywhere offers a centralized document hub where you can securely store all essential records, such as termination certificates, final tax returns, creditor notifications, and asset distribution documents. The platform also features compliance tracking, which sends reminders for critical state and federal filing deadlines.
What’s more, all your documents are accessible from any device – whether you’re at home, traveling, or consulting with an advisor. Alongside document management, the platform also improves communication with its virtual mailbox service.
Reliable Virtual Mailbox Service
A dependable mailing address is crucial during the dissolution process, especially if you’re closing your physical office or relocating. BusinessAnywhere’s virtual mailbox service ensures you have a consistent address, even during transitions. The service scans incoming mail for free and uploads digital copies to your dashboard within two business days, so you can review important correspondence anytime, anywhere. It also offers worldwide mail forwarding and automatically filters out junk mail.
BusinessAnywhere provides three virtual mailbox plans, billed annually:
- Basic: $20/month, supports up to 2 mail recipients
- Premium: $30/month, supports up to 5 mail recipients
- Advanced: $65/month, supports up to 20 mail recipients
All plans include unlimited mail handling, scanning, forwarding, and junk mail filtering.
Key Steps Summary
Closing an LLC in Texas involves following specific steps to meet state regulations and avoid legal or financial troubles. Here’s a breakdown of what you need to do:
Start by reviewing your Certificate of Formation or operating agreement. Document the approval of members or managers to officially begin the dissolution process.
Next, settle all outstanding debts and obtain a Certificate of Account Status from the Comptroller to confirm your tax obligations are fulfilled. Be mindful of timing – this certificate has an expiration date, so file promptly to avoid delays.
File the Certificate of Termination with the Secretary of State, and pay the required fee to officially dissolve your LLC. If you’re operating as a foreign LLC in Texas, you’ll need to submit either a Certificate of Withdrawal of Registration or Termination of Registration for a $15 filing fee.
Make sure to cancel any licenses, permits, and accounts tied to your LLC. Notify creditors, clients, and vendors about the dissolution, and distribute any remaining assets according to your operating agreement. These steps ensure that all loose ends are tied up before the process is finalized.
For help managing the administrative tasks, services like BusinessAnywhere can simplify document organization and mail handling during dissolution, ensuring your records stay in order.
Skipping any of these steps could leave LLC members exposed to potential liabilities. The entire process is governed by the Texas Business Organizations Code, and the state provides detailed forms and instructions to guide you through each requirement. With proper preparation and attention to these guidelines, you can close your Texas LLC smoothly and avoid future issues.
FAQs
What happens if I don’t properly dissolve my LLC in Texas?
Failing to officially dissolve your LLC in Texas can lead to significant financial and legal troubles. Even if your business has stopped operating, you might still be on the hook for ongoing taxes, fees, and debts tied to the LLC. On top of that, the state could impose penalties or fines for failing to meet its requirements.
Another major risk is losing the legal protections an LLC offers. Without proper dissolution, you could become personally responsible for any outstanding obligations, leaving your personal assets vulnerable. By taking the correct steps to formally dissolve your LLC, you can avoid these issues and ensure your business is closed on good terms with the state.
What is the difference between dissolving a domestic LLC and a foreign LLC in Texas?
Dissolving a domestic LLC in Texas involves a few key steps. First, you’ll need to file a Certificate of Termination with the Texas Secretary of State and pay a $40 filing fee. After that, the winding-up process begins. This includes settling any debts, distributing remaining assets among members, and canceling any permits or licenses tied to the LLC.
For a foreign LLC, the process is slightly different. You’ll need to withdraw from Texas by filing a Certificate of Withdrawal. Additionally, you must comply with Texas regulations as well as the laws of the LLC’s home state. This typically involves resolving any outstanding obligations in Texas and filing termination paperwork in the LLC’s original jurisdiction. Following the correct procedures for your LLC type is crucial to avoid any legal or financial issues.
What steps should I take if my Texas LLC doesn’t have an operating agreement for dissolution?
If your Texas LLC doesn’t have an operating agreement that specifies how to handle dissolution, you’ll need to rely on the state’s default rules. The first step is to have the members vote on the decision to dissolve the LLC, as Texas law requires this approval.
After the vote, you’ll need to file a Certificate of Termination (Form 651) with the Texas Secretary of State. This filing comes with a $40 fee. Be sure to settle all outstanding debts and liabilities, notify any affected parties, and cancel any business permits or licenses tied to the LLC. If the members can’t reach an agreement or the LLC is being dissolved involuntarily, you might need to involve the court to finalize the process.
