If you reach a point where you no longer wish to continue running your LLC business in Virginia, the best thing is to close it officially. Failing to do so as required by the law can cost you a lot in terms of penalties and tax liabilities. Although the process may be hectic and time-consuming, it is better to wind up things officially to avoid trouble in the future.
Following the right procedures will protect you from tax liabilities and allow you to move forward with your next venture without any issues. No matter the reason for dissolving an LLC, there are certain steps that you must follow.
How to Dissolve an LLC in Virginia
Choosing to dissolve your LLC in Virginia is one step in closing your business operations. Several other things will follow after that like giving notice to creditors, filing your final tax returns, and notifying any relevant government agencies.
1. Vote to Dissolve the LLC
Those who choose to dissolve companies take part in what is referred to as voluntary dissolution. This can be achieved by casting votes or adhering to the rules of the operating agreement. Every company always has an operating agreement that outlines how a dissolution can be made and what may trigger it. In case the operating agreement doesn’t have a clear structure on how to dissolve the company, then you can follow the ones outlined by the LLC laws of your state.
After everyone has voted and the majority has agreed to wind up the operations of the company, put everything in the record, and send the documents to the relevant authorities. You should also keep copies of the dissolution agreement for future reference.
2. File your final tax returns
Some states require that you obtain tax clearance to prove that you have been tax compliant in your state for all the period your business has been in operation. To accomplish this, you will need to file your returns and pay any tax dues.
When paying the tax returns for your company, ensure you inform them that it is your last or final tax returns for your business. You will be issued with a tax clearance certificate showing that you don’t have any tax liabilities. You must get a tax clearance both at the state and federal level to be on the safe side.
3. File an Article of Dissolution
Articles of dissolution is a document that allows you to ask the state or federal government to officially dissolve your business. You can obtain this form at the Secretary of State website or at your state’s corporation division. Sometimes the form is referred to as a certificate of cancellation or a certificate of dissolution.
The form basically needs you to provide detailed information about your company and its members. You may also be asked to indicate any assets that have been distributed among members. Upon approval. You will receive a certificate of dissolution from your state.
4. Settle outstanding debts
Your state may also demand that you notify all creditors before filing the articles of dissolution. Creditors may include insurance carriers, suppliers, lenders, and service providers. Some states might even require you to publish your intentions to dissolve an LLC in a local newspaper.
Your notice to creditors is meant to give them enough time to submit their claims inform them that claims submitted past the given deadline won’t be accepted. While every state may have its own deadline, it usually ranges between 90 to 180 days.
5. Asset distribution
After paying all your taxes and creditors, the remaining assets can then be distributed among LLC members. This includes any form of investment, tangible goods, and profit. You may also be guided by your operating agreement when it comes to the distribution of assets.
6. Carry out other closing processes
Properly winding down a business includes sending employees home. This means settling final payroll taxes, negotiating contract cancellations, lease and license cancellation among other things. At the end of it all, you will close your business bank accounts, state tax identification number, and Federal Employer Identification Number (FEIN).
In a nutshell, LLC dissolution in Virginia can be a long and tedious process. But if you have decided to close your business, then there’s no option but to do it as the law mandates. This will not only shield you from tax liabilities but also allow you to open another business in the future.