How to Dissolve an LLC in Arizona

Ending the life of your business is never an easy decision. The process itself, however, doesn’t have to be complicated. If you open an LLC in Arizona and for any reason decide later on that it’s time to close it, this post is for you.

To dissolve an LLC in Arizona, there are several steps you’ll need to follow and a few important considerations to keep in mind. Below, we’ll go over everything you need to know to do it correctly and avoid any issues.

Basics of LLC Dissolution

Before we discuss how to dissolve an LLC in Arizona, let’s first take a look at the basics of LLC dissolution:

Legally dissolving an LLC means that you are formally ending its existence in the eyes of the law. It releases the LLC from its ongoing filing obligations, taxes, and fees, and it prevents the company from incurring any new debts.

Types of LLC dissolution

There are three main types of LLC dissolution: judicial, administrative, and voluntary. Each type occurs under different circumstances, so it’s important to know which one applies to your business.

Administrative dissolution

This type of LLC dissolution is initiated by the Arizona Corporation Commission (ACC) if an LLC fails to comply with state requirements, such as maintaining a statutory agent (what most other states call a registered agent) or paying required fees. In many cases, administrative dissolution can be reversed through reinstatement if the LLC addresses the reasons behind the dissolution.

Judicial dissolution

Judicial dissolution occurs when the dissolution is ordered by the court, and this can happen due to reasons such as illegal activities, fraud, or situations where it becomes impossible to continue business operations.

Voluntary dissolution

Voluntary dissolution is initiated by the LLC members themselves, typically through a vote or decision by the members to end the business. It’s the most common type of dissolution, and it requires LLCs to follow a specific process outlined in the company’s operating agreement and state laws. This is the type of LLC dissolution we will focus on in this article.

Dissolving your LLC in Arizona

If you and the other members of your LLC have decided it’s time to throw in the towel, it’s essential to follow the correct process for dissolving the company. Failing to do so can result in a range of complications, but, thankfully, the process of dissolving an Arizona LLC is relatively simple.

To dissolve your LLC in Arizona, simply follow these five steps:

Step 1: Vote to dissolve the LLC

To dissolve your LLC, you must first vote to approve the dissolution. For a single-member LLC, the decision is straightforward and lies in the hands of a single person. For multi-member LLCs, though, a formal vote will be required.

Single vs multi-member LLC dissolution

Owners of a single-member LLC are not required to seek approval from anyone else before dissolving their company; instead, the decision is solely theirs to make. For a multi-member LLC, the company’s operating agreement typically outlines the procedure for voting on dissolution, including the required majority needed for approval. If your company has more than one member, be sure to refer to its operating agreement to see how the dissolution vote should proceed. Arizona doesn’t require a written operating agreement; it can be written, oral or implied. If your agreement doesn’t say how many members must consent, Arizona’s default rule (A.R.S. § 29-3701) generally requires consent in a signed record from a majority in interest of the members.

Dissolution rules in your LLC operating agreement

How to go about dissolving an LLC is largely determined by the company’s Arizona operating agreement. The procedure for voting on dissolution is one element that the operating agreement will cover, but it will also outline other aspects of the dissolution process. This includes things like how to distribute assets, cancel contracts, handle debts, and notify creditors. Because of this, any dissolution process should always begin with a careful review of your LLC’s operating agreement.

Step 2: Wind up all business affairs and handle any other business matters

Once the decision to dissolve your LLC has been made, the next step is to wind up all of your business affairs. If you want to let the public know your LLC is winding up, you can also file an optional Notice of Winding Up with the ACC ($10). Winding up can include things like:

• Notifying your statutory agent, suppliers, customers, and any other stakeholders
• Canceling all of your business licenses or permits
• Handling any employee matters, such as final paychecks and unemployment insurance
• Closing business bank accounts and making sure that you’ve met all financial obligations

Step 3: Notify creditors and claimants about your LLC’s dissolution, settle existing debts, and distribute remaining assets

Unfortunately, business debts don’t go away just because a company is being dissolved. Before you’ll be able to legally dissolve your Arizona LLC, you’ll need to notify all creditors and claimants and settle any outstanding debts that the company has. All business debts, such as credit card debt, loans, or leases, must be paid off before the dissolution can be finalized.

Once debts are settled, you’ll then need to distribute any remaining assets among the LLC members. Your company’s operating agreement should outline how this process is to be conducted.

Step 4: Notify tax agencies and settle remaining taxes

The final step before you can legally dissolve your Arizona LLC is to file final state and federal tax returns. If your company owes any taxes, these will need to be paid as well.

Be sure to close any accounts you have with the Arizona Department of Revenue, such as your Transaction Privilege Tax (TPT) license and withholding account, so you don’t continue to receive filing requirements or penalties after your business has closed.

Step 5: File Articles of Termination with the Arizona Corporation Commission

Once you’ve completed all of the steps listed above, you can formally end your Arizona LLC by filing Articles of Termination with the Arizona Corporation Commission (ACC). (Articles of Dissolution are the form corporations use; LLCs file Articles of Termination.)

Be sure to carefully review the form and answer all the required questions to avoid any mistakes that could lead to delays. You can file the Articles of Termination online or by mail.

To file online, log in to or create an account on the ACC’s Arizona Business Center (formerly eCorp), find your LLC by its name or entity ID, and choose the option to file Articles of Termination. The filing fee is $35, or $70 with expedited processing.

To file by mail, complete the Articles of Termination form and include a check or money order in the amount of $35 for the filing fee ($70 for expedited processing), then mail the form to this address:

Arizona Corporation Commission

Corporations Division

1300 W. Washington St.

Phoenix, AZ 85007

You will receive confirmation once your filing has been processed. With expedited processing, filings are typically processed in 3 to 5 business days; regular processing typically takes 14 to 16 business days.

Conclusion

Dissolving a company you’ve worked hard to build can be a stressful time. However, you can make it at least a little less stressful by ensuring that you are following the correct dissolution process.

Remember, when one door closes another opens, and the lessons you learned from owning your LLC are sure to help you in your next venture. Closing a business can be heartbreaking, but think of it as an opportunity to start something new!

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