Anyone who have opened an LLC in New York and had to dissolve it, knows it can be a mixed bag of emotions, ranging from despair to exhilaration. 

Whatever your reason for dissolving your LLC, positive or negative, you must take steps to ensure you dissolve it correctly and free yourself from future liabilities or legal complications.

In this post, you’ll learn how to dissolve an LLC in New York, enabling you to move on to new ventures. 

Basics of LLC Dissolution

Dissolution is when you officially dissolve your New York LLC by completing and submitting your articles of dissolution to the secretary of state. 

The process involves several steps you must complete. Once concluded, the dissolution ​​removes your LLC’s independent legal status, prevents further obligatory state and federal tax filings, and removes future legal or financial liabilities. 

To ensure the New York Secretary of State approves your dissolution application, you must first confirm the reason for dissolution and then follow the procedures relative to the closure. 

Types of LLC Dissolution

Dissolution has three categories: voluntary, administrative, and judicial. The dissolution procedure you will follow depends on which dissolution type applies to your LLC.

Voluntary dissolution

Voluntary dissolution means the LLC members (or the individual owner of a single LLC) choose to close their business. 

For multi-member LLCs, this often requires a majority vote, or a percentage vote relative to the LLC’s operating agreement. 

Voluntary dissolution usually happens for 2 reasons: 

• Members vote to dissolve the LLC because of financial difficulties or internal disputes.
• A member or members present a dissolution trigger, like the departure or death of another LLC owner.

Administrative dissolution

Administrative dissolution is enforced by the state when an LLC fails to comply with the New York LLC’s requirements and obligations, which can include:

• Not paying the New York state franchise tax (a filing fee in the Big Apple) within the appropriate time.
• Not submitting an LLC annual report (a biennial statement in New York) within the due date.
• Not designating a New York registered agent.

Judicial dissolution

Judicial dissolution (known as the corporate death penalty) is when a court orders your LLC dissolution.

Some reasons for judicial dissolution are:

• Internal disagreements between LLC members (which is more common than you might think and why every LLC needs an operating agreement).
• Fraudulent activities or mismanagement by an LLC member or manager.
• A member’s inability to fulfill their responsibilities towards the LLC because of mental illness or death.
• LLC members breaching their fiduciary duty.

Dissolving Your LLC in New York

The steps you must follow to dissolve your New York LLC depend on which type of dissolution applies to you.

However, whatever the reason, you must follow the process correctly to ensure your dissolution is approved.  

The following steps (except one) apply to all dissolution types; the first step is only relative to voluntary dissolution.  

Step 1: Vote to dissolve the LLC

LLC members must vote to dissolve their LLC; the majority of the vote depends on the LLC’s operating agreement terms.

Once members have voted in majority as per their operating agreement, they must record their decision in the LLC’s official minutes.  

However, if the LLC doesn’t have an operating agreement, the state will implement the New York LLC Act, which includes recognizing an LLC’s members’ majority vote or written consent to close the business. 

Single vs. multi-member LLC dissolution

The key difference between single LLC and multi-member LLC dissolution is members of a multi-member must vote in majority favor to dissolve the business. 

Dissolution rules in your LLC operating agreement

Your LLC operating agreement should include every rule and member’s responsibility for running and dissolving the LLC. 

Before implementing LLC dissolution, always refer to your operating agreement to confirm your reasons for dissolution and comply with the internal terms and conditions. 

Operating agreement rules often include:

• The number (or percentage) of members who must approve dissolution.
• How the LLC will discharge its debts and other liabilities.
• The procedure for settling and closing the LLC’s activities.
• How members will divide assets, cancel contracts, and handle debts.

New York-Specific rules for voting to dissolve your LLC

New York LLCs no longer wanting to continue in business can apply for voluntary dissolution. 

Implementing voluntary dissolution requires preparing certain documents and filings and gaining tax clearance from the relative authorities; other rules include:

• Shareholders must vote in favor of dissolution.
• Members must provide a plan for the dissolution and distribution of assets.
• Members must gain consent from the New York State Department of Taxation & Finance.
• The certificate of dissolution must be completed and filed, including in any other states where the LLC does business.
• Members must wind up all business affairs.
• You must notify all creditors and debtors of the LLC dissolution.

We’ll look closer at those next:

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

In addition to paying any outstanding invoices and tax obligations, LLC members must take specific steps to wind up their LLC’s business affairs correctly.

These steps include: 

• Canceling the LLC’s business licenses and permits.
• Closing any LLC registrations in other states.
• Notifying all customers and suppliers.
• Negotiating the canceling any existing business contracts or leases.
• Closing all business bank accounts and lines of credit.
• Notifying your registered agent.
• Inform all staff members and follow New York employee laws.

Step 3: Settle debts and assets with creditors

To dissolve your New York LLC, you must meet its financial obligations by informing claimants and paying all outstanding debts owed. 

Failure to notify your LLC’s creditors before closing your business can result in legal action, such as your accounts going to a collection agency. 

Multi-member LLC owners must sell all remaining assets and divide any remaining capital (after paying all their bills) as per their LLC operating agreement. 

Step 4: Notify tax agencies and settle remaining taxes

Before dissolving your LLC, you must file and pay all outstanding income, sales, and employment taxes with the appropriate New York state and federal authorities. 

New York state doesn’t require an LLC to apply for tax clearance before dissolution; however, its Department of Taxation and Finance does advise filing the below returns relative to your business:  

• LLCs with employees must file Form NYS-45, its quarterly combined withholding, wage reporting, and unemployment insurance return.
• LLCs registered for sales tax must file a final sales tax return.  * A final state income tax return.
• Single-member LLCs must report their final income and expense report on their New York State personal income tax return.
• LLCs treated as partnerships for federal tax must file Form IT-24—Partnership Return.
• LLCs treated as corporations for federal tax purposes must file a New York State corporation franchise tax return.

Step 5: File a certificate of dissolution from the New York Comptroller of Public

Your last step in dissolving your New York LLC is completing and filing your articles of dissolution with the New York Secretary of State within 90 days after the winding up of your business. 

You can download and file your Articles of Dissolution using the New York Department of State’s website and mail it (including the $60 statuary fee) to:

New York Department of State, Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231

Conclusion

And that’s what you must do to dissolve your LLC in New York.

Complete each step in order and then send your articles of dissolution to the New York Department of State.

LLCs with internal disputes, vast debts, or multiple assets should consider speaking with a New York LLC dissolution lawyer.

I hope you found this post helpful, and I wish you the best going forward.

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