Closing a business in Utah can be an emotional and stressful experience. However, as a business owner, you should know when it is time to dissolve an LLC. Whether it fails or has outlived its intended purpose, you have to make sure that you properly and legally close it to avoid any issues in the future. To do this, you have to undergo the process of dissolution.
Common Reasons For Business Closure
There are a variety of reasons why a company owner deems it necessary to end their business operations. Here are some of the most common:
- The business has become unprofitable.
- The company has accomplished its intended purpose.
- A member passes away, enters bankruptcy, or has become incompetent.
- There is a disagreement among the members.
When you formed your Utah LLC, you filed formal paperwork with the Division of Corporations & Commercial Code. With its approval, you can legally conduct operations in the state. Your LLC also has to comply with reporting and tax obligations. Failure to do so can lead to penalties and other repercussions.
Likewise, you will also need to follow a process and file formal paperwork if you want to cease your business activities. You have to inform the state of your intent to close the company.
Generally, dissolving a company is the official way to permanently close a business. You have to complete multiple steps when you plan to dissolve an LLC. If you fail to accomplish all of them, you can be held personally liable for the debts and obligations of the LLC. Additionally, your company will continue to be responsible for any recurring fees and penalties.
How To Dissolve An LLC In Utah
The multi-step process can be a bit overwhelming. However, knowing what you need to do and prepare can help you finish it with ease.
- Vote To Dissolve – The first thing your LLC needs is for your members to have an official agreement to close the business. For the voting requirements, you can check your formation documents. LLC owners usually put the details either on the Articles of Organization or the Operating Agreement. If your documents do not have any provisions regarding dissolution, you have to follow the business statutes of the state. Under the LLC Act of Utah, you will need a written agreement signed by all members to approve the dissolution. Make sure you record the resolution in the minutes of your meeting or use a written consent form. You should also file it in your LLC’s record book to ensure proper documentation.
- Filing Formal Paperwork – As stated earlier, you will have to submit the appropriate paperwork to terminate your business entity in Utah. You will have to file a completed Statement of Dissolution of Limited Liability Company form with the Division of Corporations & Commercial Code. Normal processing, which usually takes 5 to 7 business days, is free of charge. If you want expedited processing of not more than 48 hours, you will have to pay $75.
To complete the form, you will have to disclose some pieces of information related to your Utah LLC. These include the following:
- LLC name
- Business entity number
- Effective date of dissolution
- Authorization to have a non-manager or non-member to sign the form, if applicable
- The name and signature of the authorized representative
You can submit the documents to the following address:
Utah Division of Corporations & Commercial Code
P.O. Box 146705
Salt Lake City, Utah 84114-6705
When you send your dissolution documents, you may have to attach a cover letter with the name of your LLC, its business entity number, return address, and contact information. You also need to include the return address on the envelope with adequate first-class postage if you want a copy of the Statement of Dissolution.
- Getting Tax Clearance – Utah does not require all business entities to acquire tax clearance, but you have to make sure that your LLC does not have any pending tax obligations. You should also state in your Internal Revenue Service (IRS) form that it will be your LLC’s final return.
The types of taxes your company may owe include the following:
- Employee withholding tax and/or unemployment insurance tax (if your company hired employees)
- Sales and tax use (if your company was engaged in selling taxable goods or services)
- Winding Up Process – Your responsibilities do not end with the filing of your Statement of Dissolution. You will have to settle all the obligations of your company.
- You will have to liquidate all the assets of the company and remove all liabilities and obligations according to the priorities set by the law.
- Inform any known claimants about the dissolution of your LLC. Give notice on where and until when they can submit claims.
- If there are any remaining assets upon the settlement of obligation, distribute them to the members according to ownership interests.
- Cancel any business licenses and permits.
- If necessary, file IRS Form 966 within 30 days of the dissolution.
- If necessary, close the IRS account of the LLC associated with its employer identification number (EIN). You can do this by sending the IRS a letter that includes the complete legal name of your LLC, your EIN, the business address, and the reason why you are requesting to close the account.
- Close all bank accounts and credit lines under the name of the LLC.
Getting Help To Dissolve An LLC
Voluntarily dissolving your business requires you to follow state laws, so you will have to go through a process involving several tasks. Trying to handle them on your own can be a bit challenging and may take a lot of time. Additionally, it may be hard for you since you are still coping with the idea of closing your business.
Fortunately, you can lessen the burden you’re carrying. You can contact professionals who understand how to dissolve an LLC. An experienced and reliable third-party organization like DoMyLLC is also an excellent choice. Our team of experts can streamline the process by handling the preparation and filing of the formal paperwork for you.
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