How to Dissolve an LLC in North Dakota

Basics of LLC dissolution

When you dissolve your LLC, you are removing your LLC’s independent legal status from North Dakota’s registry. You are canceling it with the North Dakota Secretary of State. You can do this voluntarily. Under some circumstances, discussed later in this article, you may be forced to involuntarily dissolve your LLC.

Before you file to end your LLC, you should wind up its affairs: pay or provide for its debts, notify creditors, and close tax and other accounts.

Types of LLC dissolution

There are three ways an LLC can end: voluntarily, by the Secretary of State, or by court order. Each type has its own procedural requirements.

Administrative termination

This is when the Secretary of State terminates your LLC because you failed to comply with the state’s LLC obligations. Some examples of these failures include:

• Failure to comply with the requirement to have a Registered Agent on file who has a physical address in North Dakota.
• Failure to file your North Dakota annual report by November 15.

You may not even be aware of these failures and continue operating your business. If you miss your annual report, your LLC is placed in Not Good Standing. If the report still isn’t filed, the Secretary of State typically terminates the LLC within 6 to 12 months. You have 1 year to reinstate.

Pay close attention to be sure you follow all the LLC legal requirements imposed by the North Dakota office of the Secretary of State so this does not happen to your LLC.

Judicial dissolution

A judicial dissolution is when there has been a legal process resulting in a court order to dissolve the LLC. A member can ask a court to dissolve the LLC if its activities are unlawful, if it’s no longer reasonably practicable to carry on the business, or if those in control have acted illegally, fraudulently or oppressively in a way that harms the member. The court can also order another remedy, such as buying out the member (N.D.C.C. 10-32.1-50).

LLC dissolution in North Dakota

It takes time, work, and diligence to dissolve your LLC. When you create an LLC in North Dakota, your operating agreement (which you keep, not file) may set out the procedures to follow when you decide to dissolve.

An overview of the requirements for dissolving your LLC in North Dakota includes:

1. Following all the North Dakota requirements for dissolving the LLC, including filing all necessary paperwork and paying all debts and taxes.
2. Winding up the business. Once the members decide to dissolve, the LLC may only wind up: pay its bills, sell assets and distribute what is left to members.

Take the following steps to dissolve your North Dakota LLC.

Step 1: Vote to dissolve the LLC

The members must vote on whether to dissolve the LLC. The meaning of the vote depends on whether the LLC is a single or multi-member entity.

Single vs. multi-member LLC dissolution

A single member LLC can be dissolved based on the decision of the single member. In a multi-member LLC, check your operating agreement first. If it doesn’t say otherwise, North Dakota law requires the consent of all members (N.D.C.C. 10-32.1-50). Record the decision in meeting minutes or a written consent.

Dissolution rules in your LLC operating agreement

The dissolution clause set forth in your North Dakota LLC operating agreement governs the dissolution process. This may include how assets are divided, the process for canceling contracts, handling debts, and dividing assets.

After the vote for dissolution is recorded, a formal date for the dissolution is set. The LLC assets should then be accounted for and divided among the stakeholders and members.

The final step is to notify all the creditors so the debts can be settled.

North Dakota specific rules for dissolving your LLC

North Dakota lets you file an optional Notice of Dissolution ($10) with the Secretary of State once members approve, to let the public know the LLC is winding up.

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

As part of the dissolution process, you will be winding up all aspects of your business operations. Some specific winding up tasks include:

• Notifying your registered agent, your suppliers, and your customers that the LLC is dissolving.
• Closing all business bank accounts and any line of credit.
• Canceling all business credit cards.
• Canceling business licenses and permits. Don’t forget to cancel any that are on an automatic renewal plan.
• Handling employee matters if applicable. This includes making sure all final employee tax returns are filed, so that members are not later liable for paying unpaid payroll taxes.
• Liquidate all assets and pay all debt. Assets may include bank accounts, inventory, machinery, buildings, land, and more.

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

Notify known creditors and pay or settle your debts before you file. Any debts your business has, whether credit card debt or bank loans, must be paid or provided for before the dissolution can be finalized.

If assets remain after all debts and taxes are paid, they are distributed among the members.

Step 4: Notify tax agencies and settle remaining taxes

You are required to contact all government agencies, local, state, and federal, and pay all outstanding taxes by the date you plan to dissolve your LLC. Some of these taxes are:

• If your LLC has employees, unemployment insurance tax and employee withholding tax.
• If your LLC sells taxable goods, you must pay the sales and use tax.
• Taxes that must be paid include federal and state taxes, such as income tax, sales tax and withholding.

North Dakota does not require you to obtain a tax clearance certificate in order to dissolve your LLC. File final federal and state returns, checking the “final return” box where the form has one, and close your accounts with the Office of State Tax Commissioner and Job Service North Dakota.

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

When winding up is complete, file Articles of Dissolution and Termination with the North Dakota Secretary of State. The filing fee is $20. Your LLC’s legal existence ends when the filing takes effect.

You can file through the FirstStop portal and pay by credit card. You can also download the form, fill it out, and take it in person to the North Dakota Secretary of State physical office along with the filing fee.

Conclusion

Before you lock the door to your business, go over your checklist to be sure you are ready to say goodbye:

• Are all business contracts ended?
• Are all LLC bank accounts closed and credit cards canceled?
• Are all local, state, and federal business licenses or permits canceled and none scheduled for auto-renewal?
• Are all lease or rental agreements terminated?
• Have you informed your clients that your business is closed?

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