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How to Dissolve an LLC in Texas

How to Dissolve an LLC in Texas

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In the US, 20.8% of small businesses fail within the first year, and by year 20, almost 80% have closed up shop. Needless to say, it’s tough out there, and the odds are against you.

Considering that Texas has a fantastic economy, you might’ve had a thriving company in the state. But consumers can be fickle, and business isn’t what it used to be. It’s time to call it quits and focus your efforts on something new.

In that case, you’ll have to dissolve your LLC properly to move on. Here’s how to dissolve an LLC in Texas.

Hold an LLC Members Vote

If there are other members in the LLC, then you can’t just unilaterally decide to end the business. You must first call everyone together on a reasonable date so you can all agree on dissolving the LLC.

Typically, you’ll need a unanimous vote to go through with the dissolution. However, your operating agreement may have different terms listed, so refer to it before the vote.

Notify Relevant Parties of Your Dissolution

To avoid legal trouble, you’ll want to notify relevant parties that your LLC’s dissolving. This includes creditors, vendors, your current customers, the IRS, and the Texas Comptroller of Public Accounts.

Make sure that you settle all debts and obligations before dissolution. Pay off outstanding invoices and give customers ample time to do things like end services or request refunds.

In addition, if you have employees, notify them as well. Cose payroll accounts and fulfill final payroll obligations.

Lastly, all LLC members should already be aware of the company’s dissolution since you called a vote for it. The next step is to inform them of how the remaining assets will be distributed or sold, according to your operating agreement.

Request a Certificate of Account Status for Dissolution/Termination

Get in touch with the Texas Comptroller of Public Accounts to request Comptroller Form 05-359 for this certificate. Ensure that you’ve already paid all your LLC’s taxes beforehand, as this certificate verifies that you’ve done so.

How to Close an LLC in Texas: Domestic vs Foreign Entities

What you do next depends on whether your LLC is domestic or foreign. “Domestic” means that the company was formed in Texas, while “foreign” means formed in another state, but registered to do business in Texas.

File the Certificate of Termination of a Domestic Entity

If you formed your LLC in Texas, then you’ll have to file Form 651 with the Secretary of State. More specifically, you’ll need to send off two copies signed by an authorized LLC manager or member manager.

Attach your Certificate of Account Status for Dissolution/Termination with each copy.

Dissolving a Foreign Entity

To dissolve your foreign LLC, you’ll have to file Form 608, which is a Certificate of Withdrawal of Registration. You’ll also need two copies that are signed by an authorized LLC manager or member manager. Here, the filing fee is lower ($15), and you’ll also have to attach the Certificate of Account Status for Dissolution/Termination.

Have you already dissolved your LLC in the state where you originally formed it? Then the form you’ll use is Form 612, Termination of Registration.

Have an authorized person sign two copies of Form 612, and attach the Certificate of Account Status for Dissolution/Termination. In addition, you’ll need an official document verifying your LLC’s dissolution in the origin state.

Close Business Accounts

At this time, cancel any permits or licenses held by the LLC. You should also close any relevant business accounts associated with the company.

On that note, if you have an employer identification number (EIN), you won’t have to do anything. Like an SSN, once a number is generated, it’s associated with that particular business forever. If your LLC’s been dissolved, then your EIN won’t be reassigned to another company.

Involuntary Dissolution of a Texas LLC

Do note that your Texas LLC can be involuntarily dissolved as well. This can happen if you’ve failed to be compliant; for example, if you haven’t filed your LLC’s annual franchise tax form (Form 05-158-A). The state would be the party pursuing this action, although a court can do so too.

Should your LLC go through involuntary dissolution, you may be wondering about how to reinstate an LLC in Texas. In general, you’ll have to rectify the situation before your LLC can operate again.

In most cases, an involuntary dissolution will happen because you’re behind on your annual franchise tax form. This means that you’ll have to catch up with all tax reports, plus you’ll have to pay everything you owe; this includes taxes, penalties, and interest. If you need assistance, then you can always contact the Texas Comptroller.

For your information, you’ll pay a 5% penalty immediately after the due date, and another 5% if you still haven’t filed 30 days later. Accrued interest (prime rate + 1%) will start 60 days after the due date.

That’s How to Dissolve an LLC in Texas

Unfortunately, there may come a time when you need to close your business and cut your losses. Now that you know how to dissolve an LLC in Texas, you’ll know exactly what to do, whether your LLC is domestic or foreign.

As a result, you’ll be able to move forward quickly. If you have new business ideas, this will enable you to get started fast, which has a significant effect in competitive industries.

If it’s time to start a new LLC, then sign up with Business Anywhere today. We can register your new company in any state, and in under 10 minutes too.

About Author

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Rick Mak

Rick Mak is a 30-year veteran businessman, having started, bought, and/or sold more than a dozen companies. He has bachelor's degrees in International Business, Finance, and Economics, with masters in both Entrepreneurship and International Law. He has spoken at hundreds of conferences around the world during his career on entrepreneurship, international tax law, asset protection, and company structure. Business Anywhere Editorial Guidelines

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