There comes a point in an entrepreneur’s life when it feels like the right time to dissolve a Limited Liability Company and look forward to new opportunities. You may want to dissolve your LLC because it has fulfilled its purpose, you’ve reached retirement age, or other circumstances signal that it’s time to shutter operations. Regardless of why you made the choice to close your LLC, it’s essential to take measured and appropriate steps to complete an exit strategy. If you have an LLC in Nevada and decide to close it, this post is for you.
Basics of LLC Dissolution
Incomplete business plans tend to omit exit strategies because they either feel like bad omens or indicate a lack of confidence in the organization. Because enthusiastic business professionals prefer to look forward to goal achievement and profitability, few understand how to dissolve your Nevada LLC. Much like the initial planning stage, you’ll need to handle a wide variety of facets, such as finalizing your books, paying state and federal taxes, and filing official documents with the Nevada Secretary of State.
It’s essential to keep in mind that LLC dissolution is a formal and legal process that notifies creditors, landlords, vendors, and other professionals in your orbit. One of the primary reasons to dissolve your LLC involves debt protection. The good news is that by understanding the types of LLC dissolution and the closure steps involved, you can maintain the corporate veil protections afforded by this type of entity.
Types of LLC Dissolution
Closing an LLC in Nevada is not an everyday occurrence. Plenty of entrepreneurs and stakeholders are surprised to learn there are three ways an LLC can end: judicial, voluntary, and charter revocation after default. Court-ordered dissolution and revocation are largely viewed as involuntary, and you would be wise to avoid having the entity’s charter revoked.
Default and Revocation
If an LLC doesn’t file its annual list and pay its fees on time, it goes into default and owes a $75 penalty (NRS 86.272). If it stays in default, its charter is revoked (NRS 86.274), and it no longer has the right to do business in Nevada. To reinstate, the LLC pays a $300 reinstatement fee plus all back fees and penalties, and a charter that has been revoked for 5 consecutive years can’t be reinstated (NRS 86.276).
Judicial Dissolution
This type of involuntary LLC dissolution involves a court proceeding. Creditors, negatively impacted parties, or government officials may bring an action against the enterprise. In some cases, owners cannot agree on how to move forward, and a judge could decide the only reasonable solution is to dissolve the LLC. A court can order an LLC dissolved (NRS 86.495), and the LLC then winds up its affairs.
Voluntary Dissolution
Following the ethical and professional standards expected to shutter a Nevada LLC is by far the path of least resistance. The process tasks owners and key individuals with conducting a thorough review of assets, cash-on-hand, expected revenue, debts, and wide-reaching other issues. The LLC files Articles of Dissolution with the Secretary of State and then winds up its affairs.
Dissolving Your LLC in Nevada
The Nevada Secretary of State has a relatively efficient LLC dissolution process in place on its ORION business portal. File Articles of Dissolution as soon as practicable after the members decide to dissolve (NRS 86.531). After filing, the managers or members act as trustees to wind up the LLC’s affairs: collecting assets, paying creditors and distributing what’s left (NRS 86.541). A manager signs the articles, or a member if the LLC isn’t manager-managed.
Step 1: Vote to Dissolve the LLC
Unless your articles of organization or operating agreement say otherwise, dissolution requires the vote or written agreement of all members (NRS 86.491). While individually owned LLCs can skip this step, it’s crucial to record the decision and keep a record of the action.
Single vs multi member LLC dissolution
One of the benefits of when you create an LLC is its flexibility. The organization can have a sole owner or numerous participants. Closing a multi member LLC will require assets and cash to be distributed in accordance with your operating agreement and Nevada law after all debts are resolved. Single member LLC owners can simply pass the profit through their individual IRS filing.
Dissolution rules in your LLC operating agreement
A Nevada LLC operating agreement can only be adopted by unanimous consent of the members (or by the sole member). That does not necessarily mean 100 percent of the owners must agree to close the entity. A smartly crafted document typically includes clauses that outline dissolution procedures. The framework of matters such as dividing assets, real estate valuations, terminating contracts, and debt resolution are key elements to follow. Failing to adhere to the legally binding dissolution rules in your LLC operating agreement will likely trigger a civil lawsuit.
Step 2: File Articles of Dissolution with the Secretary of State
File online through the Secretary of State’s ORION business portal, where the current Articles of Dissolution form is available. Before you file, you’ll need to gather some information. This includes the entity name, effective date of dissolution, and decide how quickly you want it to go into effect. The filing fee for Articles of Dissolution is $100. Certified copies are $30 each. Expedited processing costs $125 for 24-hour, $500 for 2-hour, and $1,000 for 1-hour service. If you file by mail, standard and expedited filings can be mailed to the following.
Regular or Expedited Filings:
- Secretary of State Commercial Recordings Division
- 401 North Carson Street
- Carson City NV 89701-4201
Expedited Filings Only:
- Secretary of State
- North Las Vegas City Hall
- 2250 Las Vegas Blvd. North, Suite 400
- North Las Vegas, NV 89030
Step 3: Wind Up All Business Affairs and Handle Any Other Business Matters
Shuttering an LLC would seem to call for “winding down” operations. Oddly, the term “winding up” is generally used when notifying individuals and other companies about your intent to dissolve your LLC in Nevada. These usually include notifying the registered agent, landlords, contractors, banks, and staff members, among others. A transparent winding up process helps maintain your reputation as a reliable member of the business community.
Step 4: Notify Creditors and Claimants About Your LLC’s Dissolution
No scenario exists where avoiding creditors or claimants doesn’t result in controversy, hard feelings, or litigation. An LLC must resolve any debts, leases, taxes, and other financial issues. In Nevada, an LLC may be able to operate past its dissolution for the purpose of paying creditors. It’s important to notify all impacted parties early and negotiate settlements. Claims against a dissolved LLC generally must be brought within 2 years after the articles of dissolution take effect, or 3 years for claims the claimant couldn’t have known about (NRS 86.505).
Step 5: Notify Tax Agencies and settle remaining taxes
All businesses and owners have a responsibility to pay state and federal taxes. Regardless of whether the operation was profitable, broke even, or ran red ink, agencies expect tax bills to get paid. It may be prudent to enlist the support of a tax professional to ensure an accurate IRS filing.
Conclusion
Following the step-by-step procedures to lawfully and ethically dissolve your LLC will pay dividends. It demonstrates you are a responsible business professional who practices transparency. Completing the LLC dissolution process also prevents disgruntled vendors and employees from bringing you to court due to missteps.
FAQ
There’s no right or wrong answer to why you should dissolve your LLC in Nevada. There are instances in which a key person passes away, and their death triggers its closing. Sometimes, the cost of doing business in one area becomes too high. Many people shut down LLCs due to retirement and quality of life issues. As long as you do it by the numbers, things will fall into place.
The cost of dissolving an LLC in Nevada depends on how quickly you want it put to bed. The fee for Articles of Dissolution is $100. If you want it done quickly, 24-hour processing adds $125, 2-hour service is $500, and 1-hour service runs $1,000. You can use a check, money order, credit card, or trust account to pay the fee.
Yes. File online through the Nevada Secretary of State’s ORION business portal. Online filings are often processed quickly, but there’s no guarantee.
Online filings are often processed quickly, and mailed filings take longer. Expedited LLC dissolution services can be as quick as 1 hour if you are willing to pay the premium.
If you stop filing your annual list, the LLC goes into default and its charter is eventually revoked. Back fees and penalties keep adding up, so file Articles of Dissolution when you close. Filing dissolution also ends your State Business License renewals.
If your LLC is registered in other states, follow each state’s rules. Close accounts, pay debts, notify vendors and employees, and file the dissolution or withdrawal filing each state requires. It can involve some heavy lifting, and it may be worth considering getting professional support.