Every entrepreneur dreams of success when they formed their companies. However, certain circumstances may change the course of your entrepreneurship journey. There are times when closing a business is the best option. Deciding to close a business takes a lot of courage. After all, it is something that you worked hard for. But, once you decide to do it, you will have to make sure that you complete the process required to dissolve an LLC. This way, you will not have to face any possible issues and will be able to start fresh.
Common Reasons to Close a Business
Various reasons can force a business owner to choose to cease all the business activities of an LLC in South Carolina. Here are some of the most common:
- Your South Carolina LLC is no longer profitable.
- Your business has already fulfilled its intended purpose.
- A member of the LLC has become incompetent, enters bankruptcy, or dies.
- The LLC members have a disagreement on an important decision.
Why Dissolution is Necessary
When you created your South Carolina LLC, you registered it with the Secretary of State by submitting formal paperwork. That legalizes your operations within the state. At the same time, your company has ongoing reporting and tax obligations.
So, if you decide to cease all your LLC’s business activities in South Carolina, you need to let the Secretary of State know. This way, you can prevent any penalties and legal issues.
If you fail to properly dissolve your company, it will continue to be responsible for recurring obligations. The state may see it as a company that does not file necessary reports and taxes, which will lead to a bad standing status. When that happens, you may end up facing penalties.
Before Filing For Dissolution
Closing a business requires the completion of multiple steps. Before filing the appropriate paperwork, you will have to make sure that the LLC members approve of the dissolution. Check the operating agreement of the company for any provision regarding business closure. Make sure you include in the minutes of the meeting the resolution of the members to dissolve the company.
Unlike other states, the LLC Act of South Carolina does not have explicit instructions or statutory methods that you need to follow for voluntary dissolution in case there is no provision in the operating agreement. So, if you do not have any clause regarding business closure in your operating agreement, you may need to consult a professional or seek assistance from someone who has experience in handling South Carolina LLC dissolution. Talk to our team of experts at DoMyLLC to learn more.
How to Dissolve an LLC in South Carolina
If you think it is time for you to stop doing business in South Carolina, you have to complete the dissolution process. Failure to do that promptly will lead to tax liabilities and penalties. You may even end up facing legal issues.
Articles of Termination
To formally close your South Carolina LLC, you will have to file the Articles of Termination with the Division of Business Filings of the Secretary of State. Submit the form in duplicate. You can download a copy of the form from the website of the Secretary of State. Make sure you include a stamped envelope with a return address so that the Secretary of State can send you a copy of the filed document.
You can file by mail, UPS or FedEx, or in-person. The office of the Secretary of State accepts personal checks, money orders, and cash. If you are going to pay by checks, make them payable to the Secretary of State’s Office. The filing fee is $10. The processing time for the dissolution is around 2 business days.
To complete the form, you need to disclose the following pieces of information:
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- Business Entity Name
- The Date you Filed the Articles of Organization
- The Date of Dissolution Filing
- A Statement that the Company has Wound Up and Terminated its Legal Existence
- The Date the Articles of Termination Takes Effect if different from the date of filing
You can submit the documents to the following address:
South Carolina Secretary of State’s Office Attn:
Business Filings Division
1205 Pendleton Street, Suite 525
Columbia, SC 29201
Phone: (803) 734-2158
Your company name will be available for use of another business entity 120 days after the date the dissolution takes effect.
Winding Up
Your company will have other steps to complete. You have to finish the winding-up process. Here are the things you have to take care of:
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- Liquidate all the assets of the LLC and remove all its liabilities based on the priorities that the law has set.
- Let all known claimants know about your LLC’s dissolution. You can do this by sending a notice informing them of where and until when can they submit their claims.
- If your LLC has remaining assets after settling all its obligations, distribute them among members depending on ownership interests.
- If your business has any business licenses and permits, cancel them.
- You may need to file IRS Form 966 within 30 days of dissolution.
- You may have to close the IRS account associated with your LLC’s Employer Identification Number (EIN). To do this, send a letter to the IRS. Include the complete legal name of the company, its EIN, business address, and the reason for requesting the closure of the account.
- If there are bank accounts or credit lines under the name of the company, make sure you close them.
Business Taxes
The state does not require LLCs to secure a tax clearance before dissolving the company. As for the federal taxes, you will have to check the final return box on the Internal Revenue Service (IRS) form. It will be Schedule C for LLCs classified as a sole proprietorship and form 1065 for those treated as a partnership. Meanwhile, if you chose to be taxed as a corporation, use form 1120.
Get Help To Dissolve An LLC
If you want to dissolve an LLC in South Carolina, you will have to go through the process the state has set. If you need help in handling the whole ordeal, contact a reliable third-party organization like DoMyLLC.
Business Filing Section