Shutting down a business is hard. However, certain events may be out of a company’s control. Despite all preparations, an LLC in Virginia may have no other choice but to end its operations.
Common Reasons To Dissolve An LLC in Virginia
Voluntary dissolution of an LLC in Virginia is possible as long as the members decide to no longer do business. While some businesses end due to external factors, there are other possible reasons that could lead to closure. Here are some of them:
- Expiration Of The Business – LLCs are formed under state laws. That means they have to be registered with the Secretary of State or other governing agency through the filing of formation documents and payment of fees. In most states, companies have the option to plan the duration of the LLC, so they can set a date when the company will cease to exist. Others may also permit the planning of the expiration based on the occurrence of a specific event, such as the death of a member or bankruptcy. If the LLC in Virginia does not specify a planned expiration date, then its existence will be perpetual.
- Low Cash Flow – The financial capacity of a business is important to keep it running. Lack of cash flow can lead to dissolution as it will prevent the company from sustaining its business operations.
- Mismanagement – In some cases, the problem lies with the management of the business. A leader who lacks skills and expertise can make wrong decisions that could cost the company.
- Failure To Have Succession Planning – If the business owner is about to retire and the company has no able successor, then it may end up closing operations. The best way to prevent this is to include a succession planning provision in the LLC’s operating agreement.
- Member Disagreements – The differences in opinions and decisions among members may lead to disagreements. Many businesses end up dissolving because the members cannot reconcile disagreements over certain issues.
The Dissolution Process
Should the company deem it necessary to close down its business, what will happen next? How do I dissolve my LLC in Virginia?
Even if the dissolution is voluntary, an LLC still needs to follow a certain process. The requirements and steps will depend on state law. In Virginia, that means the submission of formal paperwork, payment of fees, and completion of obligations.
Here is a simple step-by-step guide for company owners wondering how to dissolve an LLC:
Step 1: Check the operating agreement of the LLC.
Usually, the operating agreement of an LLC has a provision on what to do to dissolve the company. Here are some of the most common steps that companies follow:
- Hold a vote with the members to adopt a resolution to dissolve the LLC.
- Record the vote in the minutes of the meeting.
- Determine when the dissolution date will take effect.
- Complete the winding up process.
In case an LLC in Virginia does not set the dissolution procedure in the operating agreement, the company will have to check the state laws for further instructions.
Step 2: Close the business tax accounts.
LLCs operating in Virginia have to maintain tax accounts in various state departments. Before dissolving a company, it is necessary to pay off all taxes and fines under these accounts. Here are some of the most common taxes that Virginia LLCs may owe:
- Employee Withholding Tax
- Unemployment Insurance Tax
- Sales And Use Tax
Closing business tax accounts is often accomplished by filing a final return with the governing agency or department. However, it is best to check with the appropriate agencies to find out if there is additional paperwork.
Step 3: File formal paperwork.
Since LLCs are registered with the state, a dissolving company will have to inform the state about its plan to close the business. To do this, submit a completed Articles of Cancellation to the Corporation Commission online or by mail. The filing costs $25. The commission normally takes 1 to 2 weeks to finish processing the document. However, a company can opt to request expedited service. Submit an Expedited Service Request form along with the Articles and pay $100 for next-day processing or $200 for same-day processing. Once the commission approves the dissolution, the company name will be available for the use of other entities in the state.
If you decide to mail the documents, use the following address:
State Corporation Commission
Office of the Clerk
P.O. Box 1197
To complete the Articles of Cancellation, the LLC will have to provide the following pieces of information:
- LLC name
- The date when the Certificate of Organization took effect
- Reason for the filing of the Articles of Cancellation
- A statement that the LLC has completed all of its winding up affairs
Step 4: Complete the winding up process.
A Virginia LLC owner will have to finish winding up their company. It will continue to exist even after dissolution for this purpose. They can either appoint a member or manager or create a team that will handle the tasks involved.
The LLC Act of Virginia indicates two main matters to include in the winding up of a company. First, the company has to pay, discharge, or make reasonable adequate provisions for the payment of the company’s debts, liabilities, and obligations. Second, the LLC has to distribute any remaining properties or assets to members.
The distribution of assets will be based on a particular order. The priority is to pay creditors, which may include members who are also creditors. It is also important to make sure that the company pays all outstanding taxes. Then, the distribution of the remaining assets, which will return the contributions of members and the rest of the team, will be in proportion to their shares.
Another key task is the notification of creditors and other claimants about the dissolution of the company. Sending a notice is optional in Virginia. However, it is advisable as it will help limit the company’s liability and ensure the safe distribution of final assets to members.
According to state law, an LLC in Virginia can send a written notice directly to all known creditors. The notice will let creditors know of the requirements for claims as well as the deadline for submission. It should also inform them that the company will no longer accept claims after the said deadline. The deadline should not be less than 120 days from the date the written notice will take effect.
To notify unknown creditors, the LLC can opt to publish a notice in a newspaper. Generally, unknown claimants have three years after the date of publication to submit a claim.
Step 5: Check other obligations.
Depending on the business activities of the company, it may have to accomplish other tasks. Here are some of the most common:
- Close all bank accounts under the Virginia LLC.
- Cancel all business licenses and permits with state and local agencies.
- Cancel the company’s IRS account associated with its Employer Identification Number (EIN).
At the federal level, the LLC will only have to check the final return box on the IRS form. If the LLC is classified as a sole proprietorship in terms of taxation, the form will be Schedule C. Meanwhile, those that are treated as a partnership will have to use form 1065. LLCs that chose to be taxed as a corporation will have to accomplish form 1120.
A common question of LLC members who have to close a business is this: How do I dissolve my LLC?
In Virginia, the process includes multiple steps. Generally, these are easy to understand and accomplish. However, they can be time-consuming and overwhelming. After all, the company also needs to take care of other responsibilities.
Fortunately, there are third-party organizations like DoMyLLC that offer business filing services. With the help of our team of experts, your company can ensure compliance with all state obligations and prevent any mistakes that could have serious repercussions. Additionally, getting help from DoMyLLC will give you access to personalized solutions that would fit the needs and circumstances of your LLC.
Talk to an expert now and find out how DoMyLLC can help streamline the process of dissolving an LLC in Virginia and make the experience hassle-free.
Business Filing Section