Dissolving Your LLC in Kansas

It can be very challenging when you need to know how to dissolve your LLC in Kansas. However, when it comes time to do so, you need to understand the “wind up” period and how to make sure everything has been implemented the right way. There’s a specific process to be followed, and failing to do that can put you at risk for fines and other penalties.

Fortunately, we can help you avoid all that and understand how to properly dissolve LLC in Kansas in order to reduce your risk. You’ll learn about the different kinds of LLC dissolution options, the steps you need to follow, and what Kansas requires of you. Here’s everything you need to know about shutting down and dissolving your Kansas Limited Liability Company (LLC).

Basics of LLC dissolution

When you want to shut your business down and you need to officially dissolve your LLC with the state you have to go through the act of dissolution. That removes the independent legal status of your LLC by canceling it through the Kansas Secretary of State. That cancellation can be done either voluntarily or involuntarily.

You want to make sure the state accepts the application for dissolution you give them, which is why you have to follow specific steps first. That can include things like notifying your creditors, paying the debts you owe, notifying federal and local government agencies, and verifying that you’ve paid your outstanding taxes and other bills, so your business entity remains in good standing.

To protect yourself from any future liabilities and dissolve your LLC the right way, following these procedures is crucial.

Types of LLC Dissolution

There are three categories of dissolution: administrative, judicial, and voluntary. Depending on which one of these dissolution types applies to your LLC the procedure you follow will be different. Here’s what to know about each dissolution type.

Administrative dissolution

When you have an administrative dissolution (Kansas calls this forfeiture), that means the State of Kansas steps in and removes the powers, rights, and authority of an LLC because it failed to comply with its obligations. Some of the reasons that could happen include:

• Failing to file the biennial information report within three months of its April 15 due date.
• Failing to maintain a resident agent on file. (Kansas uses “resident agent” for what other states call a registered agent.)
• Other compliance problems, such as unpaid state taxes, can also cause trouble with the state.

Judicial dissolution

Judicial dissolution is the legal process used when a court orders an LLC to dissolve. In Kansas, a court can dissolve an LLC in two situations (K.S.A. 17-76,117):

• An action by the attorney general, for example for fraud, abuse of the LLC’s powers, or exceeding its authority.
• A petition by members owning at least 25% of the LLC when a deadlock in management is causing irreparable injury to the business.

Voluntary dissolution

If you decide to end your LLC, that’s a voluntary dissolution. Of course, it might not be as easy as deciding to do that and filling out some paperwork. If there are several members and it’s not just you, it may be necessary to have a member vote in order for a dissolution to move forward. There are two ways this can happen:

• Members can put dissolution triggers (such as the death of a member) into the operating agreement. By default, a member’s death doesn’t dissolve a Kansas LLC (K.S.A. 17-76,116(b)).
• Members can vote for LLC dissolution due to financial problems or internal disputes.

Dissolving your LLC in Kansas

If you decide to have a voluntary dissolution for your Kansas LLC, these are the steps you’ll need to take.

Step 1: Vote to dissolve the LLC

Unless you’re the only member of your LLC, all the members (owners) will need to work together on a voluntary dissolution. Unless your operating agreement says otherwise, Kansas requires the approval of members owning two-thirds or more of the LLC’s profits interests (K.S.A. 17-76,116). LLCs formed on or before June 30, 2019 need more than two-thirds.

If your LLC has an operating agreement with pre-agreed dissolution triggers, though, that can be used in place of a member vote. An LLC that doesn’t have this language in their agreement, or doesn’t have an agreement at all, will need to default to the Kansas state statutes on the matter.

Single vs multi-member LLC dissolution

Single-member LLCs only need the decision of the member/owner in order to start the dissolution process. Multi-member LLCs need the approval of members owning two-thirds or more of the profits interests before they can be dissolved, unless the operating agreement sets a different rule.

Dissolution rules in your LLC operating agreement

Having a Kansas LLC operating agreement is important, and it should have more than just the internal rules for running the business. How to dissolve that business should also be included. Some of the rules that can be included in this agreement are:

• How many members have to approve the dissolution (or what percent of members).
• How the LLC’s activities will be settled and closed.
• How the LLC will discharge its liabilities.
• The way members will cancel contracts, handle debts, and divide any remaining assets.

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

Part of an LLC dissolution involves winding up your business’ affairs. Taking the time to do this properly is vitally important to successfully closing your LLC and ensuring that you won’t have fines or penalties from not shutting it down properly. Some of the things you should consider doing include:

1. If you have a resident agent, you’ll need to notify them.
2. You’ll want to inform customers and suppliers that you’re closing your business.
3. If you have permits and business licenses, those will need to be closed.
4. Handle any matters involving employees.
5. Stop any sales or services you have planned.
6. Create a plan to shut down your LLC’s business banking.

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

If you own an LLC or are a member of one you have liability protection from debts accrued by that business. If your LLC is having financial problems you can close it, but that doesn’t mean it doesn’t have to pay its debts.

Before you’ll be allowed to dissolve your LLC, you have to make sure to meet the financial obligations it has and allow claimants to collect monies they’re owed. Additionally, any remaining assets need to be split between the members or sold, and how that will be handled is dictated by the LLC operating agreement.

Step 4: Notify Tax Agencies and settle remaining taxes

Your LLC will want to file any final tax returns and close its Kansas Department of Revenue (KDOR) tax accounts. That means paying both state and federal taxes, so you’ve met all your obligations in that area.

Step 5: File a certificate of cancellation with the Secretary of State

The final step to dissolve your LLC is to file a Certificate of Cancellation (Form KC) with the Secretary of State. Your LLC must be in good standing to file it: if it’s delinquent, file its information report first, and if it has been forfeited, reinstate it first. The options can be found on the “Close a Business” page of the Secretary of State’s website, which looks like this:

There are requirements before filing, and it’s important to ensure that you know what these are so you can move through the process as easily as possible.

It costs $35 to file for dissolution of your LLC, and you can bring that down to $30 if you file online. You can get the forms right online, by clicking on the appropriate one for your needs.

Once you do that you’ll be taken to a form you can fill out, along with filing instructions to follow.

Conclusion

Understanding the legal requirements to dissolve your Kansas LLC is very important. Using our LLC services can help you through this journey. Once you file for a Certificate of Cancellation it’s a pretty straightforward process, but that’s because most of the required work has already been handled before you file that form.

You’ll want to take time to process the closing of your business and the LLC you formed, and look forward to the new opportunities that moving on can bring. The knowledge that you gained during your time operating your business won’t be wasted, and you can carry it forward and consider the best ways to use it for future endeavors.

FAQ