Considering the possible damages the dissolution of business might incur, seeking proper guidance when it comes to the cancellation can be overwhelming. From managing business debts and liabilities up to the filing of required forms, our team will explain each step on how to dissolve an LLC in Texas so that you can avoid additional penalties and legal disputes during the process.
How to Dissolve an LLC in Texas
Winding Up
In accordance with the Texas Business Organizations Code, any entity operating in its jurisdiction must take the necessary steps to wind up its final affairs. All of these tasks should be executed by one of the members or an individual authorized by the company.
Review LLC Operating Agreement
Voluntary dissolution of your Texas LLC could only commence according to the terms written on your certificate of formation and operating agreement. Typically, there’s a dissolution section in these documents where you can search specific steps on how to handle the cancellation of your business in Texas.
From the procedures of arranging a board meeting up to the required percentage of votes from members, the certificate of formation and operating agreement will indicate all technical processes in the event you decide to dissolve your LLC. Our team suggests following it thoroughly to prevent potential disputes.
Vote for LLC Dissolution
Following the order written in your LLC’s operating agreement and certificate of formation, the occurrence of the board meeting between members must happen without fail. Each member has the right to vote in favor or against the motion to dissolve.
Remember that even if all these business documents don’t have dissolution terms, the Business Organization Code allows any Texas LLC to cease its existence through an alternative event that would lead to winding up with the approval of all the members of the corporation.
And because this voting would dictate the fate of your LLC termination, our experts advise you to record the discussion in the official minutes of the meeting or through a consent form.
Notify Claimants
Failure to notify creditors about how to submit their claims is one of the primary reasons why business entities tend to get in legal trouble even after the occurrence of their dissolution. Although it’s not required by the state of Texas, giving notice to your claimants is an excellent business ethic that our team recommends to maintain the good image of your limited liability company.
The wisest advice our team could give to business owners when handling this part of the dissolution is to hire a business law attorney. Seeking professional help from attorneys when managing LLC liabilities would help your corporation to limit potential lawsuits in the long run.
Allocate Assets
In the event that all your liabilities and debts had been taken care of, it’s time to distribute all remaining assets to the former and current members of the business. As a Texas LLC, you have an obligation to pay off respective rights and interests strictly according to the operating agreement terms.
File Certificate of Account Status
After winding up all business affairs, the most crucial step to consider when learning how to dissolve an LLC in Texas is managing business tax clearance and filing for a Certificate of Account Status.
Before you can submit the termination forms to the secretary of state, your LLC must be cleared by the Texas Comptroller of Public Accounts from all due taxes, such as franchise tax.
In the event of dissolution, businesses are still obliged to submit a franchise tax report to the state of Texas for federal reasons. On top of filing an annual report and paying dues, your LLC must also file a franchise tax return before closing the account.
Obtaining a Certificate of Account Status means that your LLC is in good standing with the state. You may search the request form online and file Form 05-359 (Request for Certificate of Account Status) to the Texas Comptroller field office at P.O. Box 149348, Austin, TX 78714-9348.
Upon acquiring your Texas LLC’s certificate of account status, you may attach it with your certificate of termination.
File Certificate of Termination
As a business in Texas undergoing dissolution, you must submit a Certificate of Termination form to the work office of the Secretary of State. Along with the LLC’s basic information, forms should include file number assigned by the state secretary, description of the event that led to dissolution, and statement clearing your company from outstanding debt, liability, and court order.
If you’re mailing the termination form, you may send it to P.O. Box 13697, Austin, Texas 78711-3697. For in-person submissions, you can deliver it at the SOS office at James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701.
You must submit 2 signed copies of the certificate of termination to the Texas Secretary of State [1]. If you’re a little tight on schedule, we suggest downloading and filing the certificate of termination form (Form 651) over the secretary of state’s website.
Once this termination certificate has been processed, your Texas LLC name will be available in the state register. If you intend to operate using the same business name, going through dissolution isn’t a good idea.
Settle Out of State Business
If your company is qualified to operate in other states, we suggest filing separate forms to eliminate your right to transact business. Otherwise, your LLC will remain liable to certain state obligations like annual reports and taxes.
Duration and Cost of Texas LLC Dissolution
The processing of Texas LLC dissolution once filed takes about three to five business days. There’s also a minimal filing fee of $40 for the certificate. Although additional costs may incur upon availing of expedited services and seeking assistance from law firms, our team doesn’t discourage it.
FAQ
How much does it cost to dissolve an LLC in Texas?
It costs $40 to dissolve an LLC in Texas. This fee is mainly incurred for the filing of the certificate of termination to the Secretary of State. However, additional costs may vary should you decide to opt for expedited processing services or seek the services of professional business lawyers or firms.
How do you dissolve an LLC in Texas?
To dissolve an LLC in Texas, you must complete the winding-up process, which includes settling debts and liabilities to creditors, distributing assets, and paying taxes. After that, an LLC must obtain a certificate of account status and attach it with your request for termination. Within 3-5 days of processing, your LLC will officially be dissolved.
Conclusion
There’s a lot to process when trying to learn how to dissolve an LLC in Texas. Despite its complex procedures, we assure you that properly accomplishing it will save you from costly legal disputes and penalties. Along with this guide and assistance from business lawyers, you may seek additional resources on the Secretary of State website.
