Dissolve a Texan LLC
Dissolving an LLC is not an easy decision to make for any business owner. Knowing how to properly dissolve your LLC can protect any future opportunities and finances. Dissolution is the process of officially ending the existence of your Texas LLC. To dissolve a Texas LLC, you will need to file to correct paperwork with the Texas Secretary of State and all wind-up measures must be complete in order for the dissolution to take effect.
What Does It Mean To Dissolve An LLC?
Dissolving an LLC simply means putting a stop to all business operations and obligations and legally shutting down your business. The process involves several steps, and will lead ultimately up to terminate your LLC.
Why Dissolve Your LLC?
The decision to shutdown your LLC could be fueled by any number of reasons, such as:
- Business is no longer profitable
- Economic changes
- Personal Reasons (Health, Family, Emergencies, etc.)
- Financial burdens
- Legal issues
It is important to know why you are going down the path of dissolving your LLC so that your plan is fluid because, once you dissolve your LLC, there is no going back. This all may seem like a lot, but you do not have to do this alone. As your registered agent, we can help you dissolve your LLC.
Different Types of Texas LLC Dissolution
Voluntary Dissolution
This is the most common type of dissolution for a Texas LLC. In most cases, the members of the LLC making the decision to dissolve the company. This puts the wind up process in the hands of the LLC members.
Involuntary Or Judicial Dissolution
This happens when your LLC receives a court order to dissolve. This can happen for multiple different reasons, such as:
- Members are incapable of making the decisions
- Assets are not being used properly
- Mismanagement or fraud
Administrative Dissolution
This happens when the state takes away all power and authority from the LLC due to failed compliance, such as:
- Not having a registered agent for the LLC
- Not filing the entity’s annual report
- Missing the franchise tax due date
This type of dissolution can be administered without your permission or active acknowledgement. For that reason, It is important to stay on top of your business dealings. See Texas Tex. Bus. Orgs. Code Ann. § 11.314
How To Dissolve Your LLC
If you’d like to save yourself some time, you can hire us to dissolve your LLC for you. You can sign up for this service in your online client account.
To dissolve your Texas LLC, you must file a Certificate of Termination with the Secretary of State. There is a $40 filing fee. The form can be filed online.
How To File Your Certificate of Termination
1
Decide To Dissolve Your LLC
All members of your LLC must vote and agree to dissolve the LLC. Then complete and file the Certificate of Termination of a Domestic Entity to the Texas Secretary of State and pay $40 filing fee.
2
Event Requiring Wind Up
You must select one of the five options listed:
- Voluntary Dissolution & Wind Up
- Period of Duration Specified by Your Certificate of Formation is Over
- Occurrence of Event Specified by Your Certificate of Formation Has Happened
- Occurrence of Event Specified by Texas Business Organizations Code That Requires Dissolution Has Happened
- Court Decree to Dissolve Has Occurred
3
Completion of Wind Up
In order to properly dissolve your Texas LLC, you must complete all of the wind-up measures laid out in the Texas Business Organizations Code:
- Cease to Carry On Business (Except as Necessary to Wind Up)
- Send Written Notice of Dissolution to All Known Claimants
- Collect & Sell Property
- Pay off debts
- Perform Any Other Act Required to Wind Up Affairs
Note: Your wind-up responsibilities may differ depending on your business size, type, and locale
4
Effectiveness of Filing
You must select one of three options:
- Dissolution Becomes Effective Upon Filing
- Dissolution Becomes Effective Upon Later Date, No More Than 90 Days After Filing
- Dissolution Becomes Effective Upon Later Event, No More Than 90 Days After Filing
(If you select for your dissolution to occur only upon the happening of a later event, you must specify what that event will be.)
5
Tax Certificate and Execution
You must attach a certificate from the Texas Comptroller that acknowledges that all the proper taxes owed by your LLC have been paid and are up to date.
The form must be signed by an authorized individual.
Texas Dissolution FAQ
What is the difference between dissolution and termination?
Dissolution is the internal process to dissolve the LLC. On the other hand, termination is the official legal end of the LLC’s existence once the wind up is complete.
What does “winding up” mean?
Winding up is the process of handling all of your business affairs before terminating your LLC. This includes paying all of your debts, collecting outstanding payments, and selling or distributing business assets.
What if members can’t agree to dissolve?
If the members of your LLC cannot agree to a dissolution, a member can reach out to the Texas district court to request a judicial dissolution. This should only be done if there is a serious issue that is preventing your business from operating normally.
Should I cancel my EIN?
If you do not cancel your EIN after you terminate your LLC, then the IRS will continue to tax your LLC as normal. It is best to notify the IRS by filing a final tax return, then closing your account with them.
How long does the whole dissolution process take?
When you file your Certificate of Termination with the Secretary of State, it typically takes 3-5 business days for the state to process your paperwork. But, the complete process depends on the nature of your business and your wind up requirements. It can take a few weeks or several months.