Basics of LLC Dissolution

Dissolution means the end of your LLC’s existence in the state where it was organized and is registered. While there are several ways this can come about, all of them officially and legally dissolve your business.

LLC Dissolution

Dissolution is the act that terminates your LLC’s existence as a business. When it’s done properly, it protects you from all future liabilities relating to your business operations. LLC dissolution can be initiated by the member or members, or it can b directed by the State of Oklahoma or the courts. In any case, it removes your company’s independent legal status with the Oklahoma Secretary of State. It tells the State of Oklahoma and everybody else that your LLC no longer operates in the state.

Types of LLC Dissolution

LLC dissolution in Oklahoma can be voluntary or involuntary. There are two types of involuntary dissolution, administrative and judicial.

Administrative dissolution

The Oklahoma Secretary of State can administratively dissolve an LLC when it fails to meet its legal obligations to the state. Examples of unmet obligations include failure to file the Annual Certificate/Annual Report within the allotted time and failure to pay the franchise fee.

Judicial dissolution

Judicial dissolution can be ordered by a court, often in response to a petition from one or more of the members. The underlying cause might be:

• Mismanagement or fraud by one of the members
• A breach in fiduciary duty
• Disagreement between members that cannot be otherwise resolved
• Death or mental incapacitation that renders a member unable to fulfill their responsibilities

Voluntary dissolution

Voluntary dissolution takes place when an LLC’s members choose to terminate the business. There are a couple ways this could happen:

• The operating agreement may contain language that triggers dissolution in specified situations, such as the death of a member.
• Members can vote to dissolve the LLC. This may require a majority vote, depending on the number of members and the language in the LLC’s operating agreement.

Dissolving Your LLC in Oklahoma

Here are the steps you are required to follow to voluntarily dissolve your Oklahoma LLC:

Step 1: Vote to dissolve the LLC

Some Articles of Organization or operating agreements specify triggers that will mandate dissolution. An example is the death of a member. If this is the case, no vote is necessary, and you can proceed to the next step.

The operating agreement may state that the LLC can be dissolved by a majority vote of the owners. However, if the documents don’t address this topic, a unanimous vote is required to voluntarily dissolve an LLC in Oklahoma.

Single vs. multi-member LLC dissolution

A single member LLC can be voluntarily dissolved by the decision of the lone member. If an LLC has more than one member, there must be a vote. Depending on the operating agreement, dissolution may require a unanimous vote or merely a majority vote.

Dissolution rules in your LLC operating agreement

The LLC operating agreement should contain rules about dissolution. These ought to cover not only whether a unanimous vote is required but also how the LLC will discharge its liabilities, close out its business activities, and divide its remaining assets among its members. Anything not specified is governed by the laws of the State of Oklahoma.

Step 2: Create a written resolution

This document, created by the LLC and signed by the members, states that the LLC will cease operations, pay its creditors, distribute assets to its members, and go out of existence.

Step 3: Wind up all business affairs and handle any other business matters

An LLC can’t just close down shop in a day and stop doing business. It has to methodically wind up various aspects of its business operations before it can dissolve. These actions can include:

• Cancel business licenses and permits
• Notify suppliers and customers of the date when business operations will cease
• Finalize payroll and employee matters
• Prepare to close business bank accounts
• Clear out remaining merchandise and/or wind down providing services
• Notify your registered agent

If there are any pending lawsuits, these will have to be resolved.

Step 4: Notify creditors and claimants about your LLC’s dissolution, settle existing debts and distribute remaining assets

The LLC must notify all creditors and claimants about the pending dissolution. If the LLC has debts, such as credit card debt or bank loans, these have to be taken care of before the LLC can be dissolved.

Your LLC provides you with protection from personal responsibility for its liabilities, and you may dissolve your LLC if it is losing money. However, the LLC must give all creditors the opportunity to collect any amounts that they are owed. Failure to resolve outstanding debts could possibly compromise liability protection and expose members to personal liability for these balances.

Once all debts are satisfied, LLC must sell any remaining assets and distribute the proceeds to the members. The operating agreement will often dictate how the assets will be divided.

Step 5: Notify Tax Agencies and settle remaining taxes

You must let several authorities know that you will no longer be doing business and paying taxes:

• Oklahoma Tax Commission. You must inform this agency that you are dissolving. Otherwise, there can be continued accrual of taxes such as the franchise tax.
• IRS. There are several documents you must file with federal tax authorities.
• Oklahoma Employment Security Commission. You must inform this agency that you are winding down and will no longer have employees.

Step 6: File articles of dissolution with the Secretary of State

Your official dissolution is accomplished by filing a form called Articles of Dissolution of an Oklahoma Limited Liability Company with the Oklahoma Secretary of State. This is mailed to the Secretary of State at the address listed on the form.

The form requires the name of the LLC, the date of formation, the reason for dissolution, and the effective dissolution date (if it’s different from the date the form is received). The form must be signed by a manager, be dated, and list the signer’s name and address.

Once this form has been filed, your LLC is officially dissolved.

Conclusion

Some people dissolve an LLC because they have been in the business as long as they want, and they’re ready to retire or to seek new opportunities. Other dissolutions come about because of disagreement between the members or lack of business success. In any case, dissolving something that you put so much of yourself into can be an emotionally fraught process.

Filing the Articles of Dissolution is, in a sense, the final curtain, but most of the dissolution activities occur before that definitive date when you send the form to the Oklahoma Secretary of State. Actually making the decision to shut down may be the hardest part of the process. We have detailed the steps you need to take between that decision and the signature on the form that definitively puts your Oklahoma LLC to rest.

Before you wrap it all up, take a moment to congratulate yourself on the risk you took, the business you built, and the experience you gained. Good luck with whatever comes next!

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