There are dozens of reasons why you may want to stop using your limited liability company in South Carolina. Unfortunately, you can not just walk away from the business. Even if creating your South Carolina LLC was an easy and straight-forward process, closing it could require a few more steps. There are several legal processes you need to go through to wrap up any loose ends and officially dissolve your LLC.

This brief guide will explain the steps you need to take in South Carolina when dissolving your LLC with the South Carolina Secretary of State. However, since you can run into legal problems if you don’t follow the correct procedure for your LLC dissolution, it is best to consult a professional for assistance.

Basics of LLC dissolution

The dissolution of an LLC ends its legal status and ability to do business in South Carolina. However, it also ends your obligations when it comes to taxes and annual filings for the business. Dissolving an LLC can happen in several ways, and the procedure differs depending on the reason for dissolution. There are two main categories: voluntary dissolution or involuntary dissolution.

However, regardless of whether the dissolution of your business is voluntary or involuntary, you will still still need to take action to protect yourself.

Types of LLC dissolution

In South Carolina, there are three kinds of LLC business dissolutions: Administrative, judicial, and voluntary.

Administrative dissolution

An administrative dissolution is when the State of South Carolina dissolves an LLC for a violation. According to SC Code § 33-44-809, an LLC can fall under administrative dissolution when the:

• The business fails to pay taxes on time, doesn’t deliver an annual report, or neglects to file a tax return within 60 days of notification.
• The business lacks a registered agent or does not provide updated contact information to the Secretary of State when changing its registered agent.
• The period of time stated within the articles of incorporation passes.

Judicial dissolution

A judicial dissolution is when the courts determine that an activity of the LLC is so egregious that it must be dissolved. This is often referred to as a corporate death penalty, and the guidelines for issuing a judicial dissolution are spelled out in SC Code § 33-14-300. Some of the offenses include:

• Fraud was used to obtain the articles of incorporation,
• The LLC exceeded or abused the authority conferred upon it by law,
• The management is deadlocked,
• The management has acted, is acting, or will act in a manner that is illegal, fraudulent, oppressive, or unfairly prejudicial either to the corporation or to any shareholder, or
• The LLC owes money to creditors, and it is determined that the business is insolvent.

Voluntary dissolution

The LLC decides to stop doing business. Depending on how many members (registered owners) are part of the business, the decision may require a vote.

Dissolving your LLC in South Carolina

The procedures to dissolve an LLC in South Carolina are set out in SC Code § 33-14-101. This section will go over the steps that you need to take when you choose a voluntary dissolution of your South Carolina LLC.

Step 1: Vote to dissolve the LLC

A vote is sometimes, but not always, needed to dissolve an LLC in South Carolina. Obviously, single-member LLCs will not require a vote, but even some LLCs with multiple members may not require one either. The most common reason a vote may not be necessary in a multi-member LLC is because a pre-agreed dissolution trigger written into the LLC’s operating agreement was activated.

If a vote is necessary, the majority of the members must vote for the dissolution.

Dissolution rules in your LLC operating agreement

Most LLCs have operating agreements that set out the rules the members agreed to when running a particular LLC. Many operating agreements also discuss when and how the LLC can be dissolved and what actions should take place regarding debts, closing business activities, the division of LLC assets, and so on.

South Carolina-Specific rules for voting to dissolve your LLC

In the state of South Carolina, a multi-member LLC that does not have an operating agreement, one of the members needs to seek a judicial decree before dissolving the business.

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

After a majority of members vote to dissolve the LLC, the LLC members need to start settling their business affairs. These may include:

• Notifying the LLC’s registered agent about the plans to shut down the business.
• Getting in touch with vendors and any customers with ongoing accounts to tell them about the pending closure.
• Contacting any South Carolina governmental agencies to cancel business licenses or permits.
• Informing employees about ending the business and completing any required employment filings.
• Disposing or storing business records.
• Outlining when and how to close the LLC’s business bank and credit card accounts.

Step 3: Settle debts and assets with creditors

Although an LLC may shield the members’ personal assets from the business’s creditors, the LLC is still responsible for trying to settle any outstanding debts. In South Carolina, an LLC does not need to inform all creditors that they are shutting down. However, choosing to do so may reduce claims from creditors in the future, and it is a good idea to prevent legal problems.

At this point in the process, your LLC may also want to liquate any existing assets. You may need these funds to complete the dissolution process.

Step 4: Notify tax agencies and settle any remaining taxes

Unlike many other states, South Carolina does not require an LLC to obtain a tax clearance certificate when voluntarily dissolving a business. However, you should consult with your financial advisor to determine if you owe any outstanding local, state, and federal taxes and settle them. You should also file a Form 966 to inform the IRS that the business is dissolving.

Depending on your situation, your LLC may also need to deal with employee taxes on any outstanding wages.

Step 5: File articles of termination with the South Carolina Secretary of State

In South Carolina, some corporations file articles of dissolution, but LLCs file Articles of Termination instead. You can locate the articles of termination form on the state’s Business Filings website.

The one-page form is short and very straightforward. All you need to include is:

• The name of the LLC.
• The date the articles of organization was filed.
• The date of the dissolution of the LLC.
• Affirmation that the LLC has wound up its business dealings.
• The start date of the termination, if you want to wait until a particular day to terminate your business.
• Sign the form.

After filling out the form, you need to mail it to the Secretary of State along with a $10 check payable to the “Secretary of State’s Office.” Enclose a SASE to have a filed copy returned to you.

The completed form, check for $10, and SASE envelope should be sent to:

Secretary of State

Attn: Corporate Filings

1205 Pendleton Street, Suite 525 Columbia, SC 29201

You can file articles of termination using the Business Filings website.

Search for the name of your business in the search bar.

Click on the “Add Filing” button and sign into your account. You will be able to fill in the form, pay and submit the articles of termination online, and get immediate confirmation. Submitting the form online is a faster and less expensive option.

Conclusion

Dissolving a business that you worked so hard to start and run is tough, even if it is for a positive reason. Just know that ending your LLC isn’t the end of your entrepreneurial journey. You may choose to form a new LLC or even revoke the dissolution of the LLC within 120 days if you want to restart it! Whatever you decide, your new knowledge and experience with you will help you succeed moving forward.

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