Dissolving an LLC is a tricky business. You have to protect yourself from lawsuits or tax liabilities by filing the right papers with state authorities. So, it’s important that you take care of LLC dissolution-related tasks and act timely.
Why Dissolve an LLC
No one wants to deal with business issues that no longer exist. We are sure, you also do not want to be held back by anything related to your LLC, that you do not want to continue.
Therefore, formally dissolving an LLC online is important for the following reasons:
- No More Obligations to Pay LLC Annual Fees and Taxes
- You Will Not be a Defaulter of any State or Fedral Agency
- No Surprises With Lawsuits for Unpaid Debts
How to Dissolve an LLC in Texas | Step by Step Guide
We know wrapping things up is more difficult than starting a new venture. Your level of enthusiasm is not the same while terminating your Limited Liability Company (LLC) compared to the energy you once had when you conceptualized an innovative business idea and materialized in the form of your LLC.
But, some things in life are inevitable. Even terminating your LLC is your voluntary decision, it still feels heavier to carry out the last few duties. Well, we can relate to your feeling.
This is why, in this LLC dissolution guide, we tried to make things simpler and easy for you in 5 simple steps.
- Decide to Dissolve your LLC
- Get an Expert Advice
- Resolve Your Financial Obligation
- File Texas Article od Dissolution
- Some Important Closings Related to Texas LLC
Keep on reading to learn the whole process of LLC termination in simple and concise steps.
Decide to Dissolve your LLC
If your LLC dissolution is voluntary, the LLC owners must make the decision to dissolve their LLC according to the guidelines drafted in the LLC articles of organization.
Remember to document the final decision with a written agreement. To do so:
- Hold a meeting of LLC members
- Take a vote with LLC members to terminate the LLC
- Determining the formal date of dissolution
- Through the LLC’s meeting minutes, record the LLC dissolution vote
Follow Your LLC Operating Agreement
An LLC operating agreement is the document that contains the information from an LLC’s day-to-day operation to the termination of an LLC. Most Texas LLCs outline all the steps for LLC dissolution. While terminating your LLC, follow the guidelines stated in your Texas LLC operating agreement.
In case you had not defined the LLC dissolution process in your Texas LLC operating agreement, you must consult the Texas Secretary of state for further instructions.
Get an Expert Advice
Terminating an LLC is a delicate and multi-step process. It is highly recommended that you seek professional help. Depending on your LLC’s personalized needs, expert advice may come from accountants, bankers, lawyers, the IRS, business brokers, tax experts, auctioneers, etc.
If you have been running your business in a compliant manner, you may not need all the professionals to dissolve your LLC. Hiring any of the famous LLC services online will suffice you.
LLC services such as IncFile or LegalZoom take care of everything related to closing your business. You can pick a package satisfying your LLC needs, and there you go.
Resolve financial obligations
Although the state of Texas does not require you to obtain tax clearance before dissolving your LLC, it is important to resolve any outstanding tax and other financial obligations before filing the Certificate of Dissolution with your state.
Failure to resolve these issues will result in penalties and interest assessed by state and federal tax agencies. If your LLC owes back taxes to the IRS or any other state agency, you will receive a Notice of Federal Tax Lien or a Notice of State Tax Lien.
Once the IRS places a tax lien on your LLC’s property, it can be very difficult to get the tax lien released. To avoid all such stress and headache, you should resolve all the financial obligations on your Texas LLC. Some common Texas LLC financial obligations are listed below:
Texas LLC Taxes
While filing income tax returns, check the box that indicates the document is a final return. Many state revenue agencies in Texas require additional filings for sales tax.
If your LLC has employees, you may risk personal liability if you fail to obligate your payroll tax responsibilities. Inform your Texas state and federal tax agencies that your business is closing. Moreover, notify them that you will cease to file an employer’s quarterly tax form and unemployment returns.
Business Debts
Notify all creditors and lenders of your LLC of your dissolution and settle the remaining debt. Moreover, contact the business associates who owe payment to you or to whom you owe a payment.
In case you can not pay your debts, you should consider filing for bankruptcy. It’s recommended to discuss with your attorney, accountant, and insurers to ensure that everything is accounted for.
File Texas Articles of Dissolution
Texas Certificate of Termination is the legal document that you file with the Texas Secretary of State to dissolve your LLC voluntarily.
Important Note: Before filing for a Certificate of Termination, you must submit a Certificate of Account Status stating that your LLC has paid all taxes. You can get a Certificate of Account Status from Texas Comptroller website.
Once the LLC Certificate of Termination has been filed and processed by the concerned authority, your LLC will be officially dissolved and no longer legally exist.
Dissolve a Domestic LLC in Texas
You can file the Texas Domestic LLC Certificate of Termination with the Texas Secretary of State online or by downloading the form.
Complete the Certificate of Termination form, sign the document, and send it to the Texas Secretary of State. If you are filing through the mail, you need to submit two signed copies of the Certificate of Termination alongside a physical copy of your Certificate of Account Status.
Mailing Address:
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
In-Person Filing Address:
James Earl Rudder Office Building
1019 Brazos St.
Austin, TX 78701
Fax: (512) 463-5709 (must include Payment Form)
Cost of Domestic LLC DissolutionIn Texas
Texas Domestic LLC Certificate of Termination Fee is $40. This fee is payable to the Secretary of State and can be paid through credit card, check, or money order.
Dissolve a Foreign LLC in Texas
File the Texas Foreign LLC Certificate of Withdrawal with the Texas Division of Corporations online or by downloading the form given below:
Complete the Certificate of Withdrawal, sign the document, and send it to the Texas Secretary of State at the address given below:
Mailing Address:
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
In-Person Filing Address:
James Earl Rudder Office Building
1019 Brazos St.
Austin, TX 78701
Fax: (512) 463-5709 (must include Payment Form)
Cost of Foreign LLC DissolutionIn Texas
Texas Foreign LLC Certificate of Withdrawal Fee is $15. This fee is payable to the Secretary of State and can be paid through credit card, check, or money order.
Step 5: Some Important Closings Related to Texas LLC
Close your EIN
LLCs are required to contact the IRS (Internal Revenue Service) to close their Employer Identification Number (EIN) account. The IRS cannot cancel your EIN account, but you notify the agency that you no longer plan to use that EIN in the future by closing your EIN account.
When closing a business as an LLC, the IRS provides a checklist of typical tax actions to take. Make sure you fulfill all the requirements.
Close Your Business and Tax Accounts
While operating as Texas LLC, you would have various tax accounts maintained by different departments within the state of Texas. Some of the common taxes that an LLC may owe are:
- Sales & Use Tax
- Employee Withholding Tax
- Unemployment Insurance Tax
- State Income Tax
- Local Taxes
Simply filing a final return to the concerned tax agency usually means closing your tax accounts. However, you may need other official paperwork to close some accounts. Contact the concerned tax agency to close your tax account.
It is also important to close your business bank account and cancel your credit cards to avoid any financial or legal trouble in the future.
Cancel Licenses, Permits, Professional Registrations, and Business Names
After terminating your Texas LLC, it is crucial to cancel all licenses and permits that you will no longer need. Doing this will protect your reputation and finances.
Trade name, Assumed Name, or Doing Business As (DBA) is a business name other than your own name that you registered with the state or local government for rebranding, branching out into new services, products, or brands, or franchising purposes, etc.
If you have registered a Texas assumed name, you must cancel that business name registration with your local government.
Winding Up | Things to Do After Dissolving your Texas LLC
After the dissolution, your LLC continues to exist to take care of certain final matters. These matters are known as “winding up” the business. To handle winding up your LLC, you are required to designate one or more LLC members or LLC managers.
Texas’s LLC Act outlines the following key winding up tasks:
- As a going concern for a reasonable time, preserving the LLC’s business or property
- Prosecuting and defending all civil, criminal, or administrative proceedings and actions
- Discharging LLC liabilities
- Settling all LLC disputes by arbitration or mediation
- Transferring and disposing of LLC property
- Paying off debts to creditors and lenders
- Distribution of the remaining LLC assets among LLC members.
Involuntary Texas LLC Dissolutions
The state of Texas can cause an LLC LLC to be involuntarily dissolved. There are several reasons for involuntary LLC dissolution and mostly revolve around significant mistakes made by LLC members. Some of the reasons are:
- If LLC is fraudulently formed in the first place
- LLC did not appoint a registered agent let the registered agent lapse
- If LLC failed to file the proper forms to change the registered agent
- If LLC abused the privilege to operate a business in Texas
- If LLC did not pay taxes, annual reports
- If LLC fails to operate in Texas state-compliant manner
It is advisable not to operate your LLC in a manner leading to the state dissolving it against your will. The penalties and legal consequences are steeper than you might imagine.
For instance, your LLC cannot operate in Texas ever again after the involuntary dissolution. You would need to create an LLC again from the start, which would cost you time, money, and mental peace.
If you continue to operate a non-compliant LLC in Texas, you could open yourself up to all sorts of legal issues. Therefore, when it comes to following the state rules and regulations, be mindful and stay compliant.
FAQs on How to Dissolve an LLC in Texas
How do I dissolve my LLC in Texas?
To dissolve your LLC in Texas, you are required to file a signed Certificate of termination form with the Texas Secretary of state. Meanwhile, you can proceed with the winding-up process of your LLC. Please note that you also need to submit a Certificate of Account Status from the Texas Comptroller along with the Certificate of Termination.
How do I close a business in Texas?
To dissolve a business in Texas you need to follow the following steps:
- Hold a meeting of business owners and record a resolution to Dissolve the Texas business.
- Resolve all the finacial obligations
- File cancelation certificates with the state
- Clear up any business debts
- Distribute the remaining assets among business owners
- Close all business bank accounts
- Cancell all the business licences and certificates that you no longer wish to use
How long does it take to dissolve a business in Texas?
Certificate of Account Status takes 4-6 weeks to process. Processing of Certificates of termination usually takes approximately 3-5 business days.
Is it hard to dissolve an LLC?
Dissolving a business seems hard at the start. However, this is the best practice to avoid future penalties, liabilities, and lawsuits which are harder to deal with. How to dissolve an LLC guide made the LLC dissolution simple and straightforward. Follow the guide and shut the doors of lawsuits or penalties forever.
Why would you dissolve an LLC?
No one wants to deal with business issues that no longer exist. Therefore, formally dissolving an LLC is important for the following reasons:
- No More Obligations to Pay LLC Annual Fees and Taxes
- You Will Not be a Defaulter of any State or Fedral Agency
- No Surprises With Lawsuits for Unpaid Debts
What is the difference between dissolution and termination?
The terms LLC termination and LLC dissolution are often used interchangeably but have distinct legal meanings. When an entity ceases to legally exist, it is called termination of the entity. On the other hand, dissolution is the winding up of the affairs of the entity before the termination of the entity.
How much does it cost to dissolve an LLC?
Texas Foreign LLC Certificate of Withdrawal Fee is $15 and the domestic LLC Certificate of Termination fee is $40. This fee is payable to the Secretary of State and can be paid through credit card, check, or money order.
Aisha Noreen is an owner of a small business with more than 9 years of experience in the marketing industry. With the wisdom of an old soul, she always seeks innovation and mind-blowing ROI techniques. Her unique approach helped many small businesses thrive and she can surprise you in many ways as well. Believe it or not, her energy, passion, and creativity are contagious enough to transform your business and take it to another level.