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How to Dissolve an LLC in Illinois
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Ending a business is never easy. You’ve put blood, sweat, and tears into building your company. But sometimes, it’s simply time to move on. Maybe the business didn’t pan out as expected. Or you’re ready to retire and pass the torch. Whatever the reason, dissolving your Illinois LLC officially closes up shop. Although bittersweet, properly dissolving your business is an important part of the process. It ends your company’s legal existence and resolves any outstanding debts or obligations. Consider this your guide to smoothly shutting down your Illinois limited liability company.
Basics of LLC Dissolution
Legally dissolving an LLC terminates its existence. It’s the official way to close your business in the eyes of the state. Dissolving your LLC clears its name from public records. The business ceases to exist. You’ll no longer have access to the perks of being an LLC, like liability protection. The company’s debts and assets must also be settled as part of the process. Once dissolved, your business cannot conduct activity or enter into contracts. Its licenses and tax registrations are canceled. And you cannot continue to use its name.
Types of LLC Dissolution
Not all dissolutions are created equal. They typically fall into three categories:
Administrative dissolution
This type of dissolution happens when an LLC fails to follow state compliance rules. For example, if you forget to file the annual report and pay fees, Illinois may administratively dissolve your business. Fixing the issue that led to the dissolution can reinstate the LLC. But administrative dissolutions should be avoided since they can hurt your company’s reputation or credit.
Judicial dissolution
Courts can order the dissolution of an LLC under certain circumstances, like shareholder disputes. If the members cannot resolve their differences, one may request judicial dissolution to end the business. Judges will look at factors like failure to meet operating agreement terms before granting a dissolution. The court oversees details like liquidating assets and settling debts during a judicial dissolution.
Voluntary dissolution
Voluntary dissolution occurs when the LLC members choose to close the business. They file official forms with the state to terminate the company’s legal status. This is the most common type of LLC dissolution. Voluntary dissolution gives you the most control over shutting down your business on your own terms. Follow the steps properly to avoid any issues that could arise later.
Dissolving Your LLC in Illinois
Now let’s walk through terminating an LLC in Illinois from start to finish. Follow these main steps:
Step 1: Vote to dissolve the LLC
The first part of voluntary dissolution is making the decision official with a formal vote. How you go about this depends on your management structure:
Single vs. multi-member LLC dissolution
For single-member LLCs, there’s no vote required since you alone own the business. Simply make the decision to dissolve your LLC on your own. Multi-member LLCs need a majority vote to dissolve. The operating agreement spells out voting procedures and requirements. But typically, members holding more than 50% of shares must approve the dissolution.
Dissolution rules in your LLC operating agreement
Check your operating agreement before moving forward. It likely contains terms about dissolving the LLC and should be followed. For example, the operating agreement could state all members must consent to dissolving the company. Or it may lay out the process for members to buy out shares of others who want to dissolve the LLC.
Illinois-specific rules for voting to dissolve your LLC
Illinois does not have any additional laws regarding voting to dissolve an LLC. Follow the protocols in your operating agreement. If you don’t have an operating agreement, a simple majority vote of members is needed. Document the outcome of the vote in writing through meeting minutes, resolutions, or a unanimous consent agreement. This creates a record that proper procedures were followed should any issues arise down the line.
Step 2: Wind up all business affairs
Once the decision is made, wind up operations and handle any outstanding business matters. This includes:
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Notifying your registered agent and any government agencies that the LLC is dissolving. -
Canceling licenses, permits, fictitious name registrations, and business registrations. -
Terminating lease agreements and service contracts. -
Collecting any outstanding payments from clients and paying off business debt. -
Closing business bank accounts and credit cards. -
Settling any pending legal claims or lawsuits. -
Liquidating assets and distributing proceeds to members. -
Handling final payroll and severance agreements with employees.
Winding up the company’s affairs can take anywhere from several weeks to a few months depending on your situation. Set a realistic timeline and get started on closure tasks right away.
Step 3: Notify creditors and claimants
Part of voluntary dissolution requires notifying known creditors and claimants about the impending termination of your LLC. This gives them a chance to make claims against the company for any unpaid debts. In Illinois, you must publish a public notice about the dissolution once a week for three consecutive weeks. The announcement must be published in a newspaper located in the county where your LLC’s registered office is.
The notice should include:
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The LLC’s name and mailing address. -
Notification it is in the process of winding up and dissolving. -
A request for creditors to submit any claims against the company.
Mail a copy of the notice to all known creditors and claimants as well. This includes banks, vendors, suppliers, contractors, and anyone else you owe money to. Keep proof of sending the notifications. Creditors then have a 90-day window to make claims after receiving notice. Settle any outstanding debts before moving to the next steps. Gather funds to pay creditors by liquidating assets and collecting outstanding payments.
Step 4: Notify tax agencies and settle taxes
Taxes are often one of the last remaining obligations when dissolving an LLC. You must continue filing tax returns until the dissolution process is completed.
Notify federal and state tax agencies that your LLC is dissolving, including:
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IRS -
Illinois Department of Revenue -
Illinois Secretary of State
File final federal and state tax returns for the LLC covering any income up until dissolution. Pay any taxes owed for the final year to receive tax clearance. You may need to file other tax forms regarding the disposition of assets, like Form 1065 for partnership tax returns. Work with an accountant or tax advisor to ensure you fulfill all IRS and state tax requirements.
Step 5: File a Statement of Termination
The final step is filing articles of dissolution (also called a statement of termination) with the Illinois Secretary of State. This officially and legally terminates your LLC.
You must submit Form LLC-5.5 along with a $150 filing fee. Here are some tips for completing the termination statement accurately:
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Provide your LLC’s name and file number issued by the state upon formation -
Date the articles of dissolution. This is typically the date the resolution to dissolve was adopted. -
Only a manager, member, or authorized agent can sign the articles. -
List the address where you want the state to mail the notification of termination. -
Submit Form LLC-5.5 and payment to:
Illinois Secretary of State
Department of Business Services
501 S. Second St., Rm. 350
Springfield, IL 62756
Double check that all the information is correct before submitting the termination statement. Filings with errors may be rejected and delay dissolution. Once Form LLC-5.5 is processed, the Secretary of State will send a certificate of termination. This serves as official confirmation that your LLC no longer exists.
Conclusion
With that, you’ve completed the dissolution process and can close the book on your Illinois LLC. Wrapping up remaining legal and tax matters after dissolution protects you from any future liability. Although dissolving a business is often difficult, having closure through proper procedures allows you to move forward. And who knows, maybe it’s onward to your next great entrepreneurial venture!
FAQs
Reasons to dissolve an LLC include:
- You’re retiring and closing the business entirely
- The company has been inactive or is no longer operating
- You want to protect yourself from future liability
- The LLC members decide to part ways
- You need to merge the LLC with another entity
- You want to change the structure or state of formation of your business
The main fee to dissolve an Illinois LLC is the $150 statement of termination filing charge. You may also have to pay for legal/filing assistance, publishing notices, taxes, bank fees, outstanding debts, and other dissolution costs. Expect total dissolution expenses to range from $200 to $1,000+.
Yes, Illinois offers an online filing system that allows you to submit the articles of dissolution electronically instead of mailing paperwork. You’ll still need to pay the $150 fee.
The process takes around 90 days from start to finish. It may be quicker if you have a simple, debt-free LLC with minimal wind up tasks. Or it can take several months if your business has complex financials, contracts, legal issues, etc.
If an LLC doesn’t formally dissolve, it remains active on state records. This means you must continue meeting filing and tax compliance rules. You’ll also remain liable for any legal or tax issues. Neglecting to properly dissolve an LLC you want to close exposes you to serious risks.
If your LLC is registered in several states, you must complete the dissolution process separately in each one. Submit dissolution paperwork and pay fees to every state where your business is authorized to operate.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.
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