Basics of LLC Dissolution

If you register an LLC in Minnesota and need to close it for some reason, you need to go through some steps and paperwork to follow the state’s regulations for it. To dissolve your LLC means you are taking official action to remove its independent legal status in your registered state. This change in status occurs with a cancellation (voluntarily or involuntarily) with the Minnesota Secretary of State’s Office.

To move forward requires specific steps in order for your state to accept your notice of dissolution. These steps often include notifying creditors and applicable federal and local government agencies, attending to any outstanding debts, and attending to all taxes.

Only once you follow these essential steps for dissolution will you be protecting yourself from potential liabilities in the future.

Types of LLC Dissolution

There are different reasons for dissolution, and in Minnesota, those reasons are defined in state statutes. Generally, they fall into three distinct categories – Administrative dissolution, Judicial dissolution, and Voluntary dissolution.

Administrative dissolution

Administrative dissolution is initiated by the State, removing all the rights and authority of the LLC when it fails to meet its obligations.

• Not maintaining a registered agent with the Minnesota Secretary of State
• Failing to file an annual renewal notice and pay annual fees before a specified deadline

Judicial dissolution

A Judicial dissolution involves the legal process where a court is the one to order a dissolution of a particular limited liability company (LLC).

Various reasons may be cited for such action, including:

• An LLC member’s breach of fiduciary duty
• Fraud or mismanagement conducted by an LLC member or manager
• Fraud or mismanagement conducted by an LLC member or managerד
• An LLC member’s inability to meet responsibilities due to death or a mental illness

Voluntary dissolution

For a Voluntary dissolution, a Minnesota LLC’s members must unanimously vote to cease doing business.

This type of dissolution can occur in two ways:

1. In accordance with dissolution triggers included in the LLC operating agreement, which may include the departure or death of a member.

2. Due to a vote by members to dissolve the limited liability company because of financial issues or unresolvable internal disputes.

Dissolving Your LLC in Minnesota

Once dissolution is determined to be a necessary action, you will need to diligently perform the following steps.

Step 1: Vote to dissolve the LLC

Before alerting the Secretary of State’s office of dissolution, LLC members will need to conduct and record a vote to dissolve the LLC. Take the time to discuss this decision among all members, providing the reasons for doing so, and understand that a unanimous vote is necessary here in Minnesota.

Single vs. multi-member LLC dissolution

One or more individuals can form an LLC in Minnesota. Depending on which applies, there may be other nuances that need attention prior to dissolution. The LLC operating agreement will need to address these.

To dissolve a single-member LLC, the one owner/member must adhere to the operating agreement in place, and take all steps individually to dissolve the business.

To dissolve a multi-member LLC, a vote must first take place among the remaining members, taking into account what is stipulated in the operating agreement.

Be sure to record the dissolution vote in the meeting minutes.

Dissolution rules in your LLC operating agreement

When taking steps to dissolve your LLC, consult your operating agreement first and understand the included terms for dissolution.

Inclusions often found in LLC operating agreements include:

• How many members (or what percentage) must vote for dissolution
• The methods with which the LLC will handle its liabilities and debts
• Procedures for settling and then closing all LLC’s activities
• Actions for handling debts, canceling contracts, and dividing assets

It is essential that you follow any dissolution clause included in that LLC operating agreement. While this process will be somewhat simpler for single-member LLCs, it can become more involved for multi-member ones and you will need to count on that clause to help you through the process more readily and agreeably.

Minnesota-Specific Rules for Voting to Dissolve Your LLC

When voting to dissolve an LLC in Minnesota voluntarily, the following requirements must be met:

• Basing the decision in accordance with your LLC operating agreement
• Obtaining a unanimous vote among all members to approve the dissolution

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

An important part of the LLC dissolution is the winding up of the different aspects of your operations. Examples of the activities included in this “winding up” include:

• Notifying the registered agent, as well as suppliers and customers, that the business is closing
• Canceling any recurring or planned Minnesota business licenses and permits
• Handling any employee matters
• Closing business bank accounts

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

While members are protected in cases of debts accrued by the LLC, those debts still need to be paid. Follow these steps:

• Notify creditors and claimants: You will need to notify all creditors and claimants of your LLC’s dissolution.
• Settle existing debts: If your LLC has any outstanding debts (e.g., business loans, credit cards, etc.), pay these financial obligations off before dissolution becomes final.
• Distribute remaining assets: Liquidate any assets remaining after meeting financial obligations and distribute them in accordance with the guidance outlined in your LLC operating agreement.

Step 4: Notify tax agencies and settle remaining taxes

Before dissolution can occur in Minnesota, you will need to notify tax agencies and settle remaining taxes. In other words, file final tax returns and obtain tax clearance.

Common taxes to address may include:

• Employee withholding taxes (if the LLC has any employees)
• Unemployment insurance taxes
• Sales and Use Tax (for LLCs selling taxable goods in the course of conducting business)

In Minnesota, there is no requirement to obtain a tax clearance certificate for dissolution to be finalized, however, it is recommended.

Step 5: File Statement of Dissolution and Statement of Termination with the Secretary of State

The Minnesota Secretary of State requires the filing of two documents: the Statement of Dissolution and the Statement of Termination. These documents may be submitted in various ways, including online, by mail, or in person. The fee amount will depend on which method you choose.

Statement of Dissolution

File a statement of dissolution of your LLC with the Minnesota Secretary of State once the organization has been dissolved due to one of the events listed under Minnesota Statute 322C.0701. This document can be submitted either in person, by mail, or online.

You will need to include information such as the following:

• LLC file number (as provided by the Minnesota Secretary of State upon the business’ formation)
• The registered/legal name of the LLC
• A signature by authorized individual of the LLC
• Name, email, and telephone number of individual to be contacted, if necessary, about the form

The fee for Minnesota LLC dissolution is $35 when submitted via the mail. You can also do an expedited walk-in filing for $55. These fees are payable to the MN Secretary of State.

Statement of Termination

File a separate Statement of Termination form, which requires information such as the following:

• File Number (as provided by the Minnesota Secretary of State upon LLC formation)
• The registered/legal name of the LLC
• Signature by authorized individual of the LLC
• Name, email, and telephone number of individual to be contacted if necessary, about the form

This document can be filed in-person, by mail, or online at www.sos.mn.gov.

Filing fees for the Statement of Termination are as follows:

• $55 for online filing or expedited in-person filing
• $35 when submitted via mail

Conclusion

Above are the requirements for dissolving an LLC in Minnesota. Once you file the Statement of Dissolution and Statement of Termination, you have formally terminated the LLC’s status as a business registered in the state of Minnesota.

Whether you unanimously vote to close your business or your operating agreement stipulated dissolution in specific circumstances (e.g., death of a member), it is rarely easy to let go. Yet, you can still put what you have learned during the forming and running of that LLC to good use should you wish to try something new.

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