Taking the steps to register an LLC in Utah is an exciting part of launching your business, but there may come a time when you need to officially bring that chapter to a close. Whether you’re moving on to a new venture, wrapping up operations, or responding to financial challenges, dissolving your Utah LLC requires following specific legal steps. Properly closing your business ensures you avoid ongoing fees, tax obligations, and potential legal issues down the road.

Basics of LLC Dissolution

Dissolving an LLC legally signifies the formal termination of its operations, and of its status as a recognized business entity in Utah. There are several steps required if you need to dissolve your LLC.

Types of LLC Dissolution

There are several types of LLC dissolution, each of which is triggered by a different entity.

Administrative dissolution

An administrative dissolution is initiated by the state and involuntary. This is most often for failure to meet ongoing LLC requirements, such as not filing an annual report and paying the $18 fee. Failing to maintain a registered agent within the state could also result in an administrative dissolution.

If the state is pursuing an administrative dissolution of your LLC, the registered agent will receive a mailed notice from the Utah Division of Corporations and Commercial Code. You usually then have 60 days to correct the error(s), after which the state will likely proceed with the dissolution if those errors aren’t corrected. The full process for a Utah LLC administrative dissolution is legislated by Utah Code 16-10a-1421.

(It’s required that your LLC has a registered agent physically located within Utah. If you’re the registered agent but moving out of state, use a registered agent service to keep a registered agent within the state.)

Judicial dissolution

A judicial dissolution happens when a court orders the dissolution of the LLC. This may be due to lawsuits by members, significant disagreements among members that prevent the LLC’s operation, or illegal/unethical activities by the LLC. Sometimes it’s a state or federal agency that sues for a judicial dissolution because of regulatory violations.

When a judge grants orders a judicial dissolution, the court oversees the process of closing the LLC.

Voluntary dissolution

The most straightforward and common form of dissolution is a voluntary one. This is when the LLC members choose to dissolve the business. Members must vote to close the LLC, adhering to any operating agreement and state law. The laws governing voluntary dissolution of a Utah LLC are found in.

Voluntary dissolution is the most common way for business owners to close an LLC in Utah. The steps listed below are primarily for a voluntary dissolution of your Utah LLC.

Dissolving Your LLC in Utah

Step 1: Vote to dissolve the LLC

A voluntary dissolution begins with the LLC members voting to end the business. This is just you deciding to close the business if you’re the sole member (owner). It requires a vote of the members if you have a multi-member LLC with several stakeholders.

Dissolution rules in your LLC operating agreement

An operating agreement is a document that governs much of your LLC, including dissolution. An agreement is strongly recommended, although not required by Utah law. 

If your LLC has a written operating agreement in place, dissolution must follow the process set forth in the agreement. If there’s not an operating agreement, then the dissolution process needs to follow the process set forth in Utah Code Part 14. Of course, any operating agreement also must adhere to the law.

File Notice of Dissolution

Once a vote is passed, a formal notice of dissolution should be filed with the Utah State Department of Commerce to notify the state of your intention to dissolve. There is an official dissolution notice form to file with the Division of Corporations & Commercial Code.

Step 2: Wind up all business affairs

In addition to notifying the state that your LLC is ending, there are several other parties to notify:

• Employees: Of course, your employees should be notified sooner rather than later. You’ll need to take care of final payroll, W-2 statements, and possibly additional items like COBRA health insurance information.
• Registered Agent: Your registered agent will need to know that your LLC is closing. They’ll be the point person for most communications related to the dissolution.
• Local Municipalities: If your LLC has any permit applications or renewing permits, contact the local municipality to cancel any future permits. The same is true for licenses. This is typically handled by the town clerk, or they might direct you to another local office.
• Contractors: If your business uses contractors, make sure to notify them that you’ll stop sending work over. You might have to pay a fee if breaking an agreement with a contractor.
• Suppliers: Notify any suppliers that your business uses, and cancel future orders past your LLC’s last day of operations. You might have to sort through certain requirements if there’s a purchase order agreement or other contract in place.
• Customers: Notify customers or clients that you’ll be closing, preferably early on in the process so your work with them can be wound down.
• Bank: After all payments and taxes are taken care of, close your LLC’s bank accounts and lines of credit.

Step 3: Notify creditors and settle debts

You’ll need to notify all creditors with whom your business has outstanding debts. Send written notice to your business’s creditors, and include how they can submit a claim to collect the outstanding amount owed. 

Depending on what debts your business has, you might need to pay off credit card balances, commercial mortgages, commercial auto leases or loans, business loans, or other outstanding debts. Creditors generally have priority over members when liquidating assets and distributing funds.

Step 4: Notify tax agencies and settle remaining taxes

Attend to any outstanding business tax obligations, including both federal and state ones. You may need to file and pay/remit payroll taxes, property taxes, collected sales tax, or other tax obligations.

You don’t need a Tax Clearance to dissolve an LLC that’s based in Utah, but you will need one if your LLC is “foreign” (out of state). If needed, this can be requested from the Utah Department of Commerce, Division of Corporations.

This doesn’t include personal income tax that you may owe as a result of earning through the LLC. If you financially operate as a sole proprietor, you should pay income tax like you normally would. It generally should be paid through quarterly estimated self-employment tax payments and your annual 1040 filing.

Step 5: File a statement of dissolution with the State Department of Commerce

To legally end your LLC in Utah, file articles of dissolution with the Utah State Department of Commerce. This document formalizes the cessation of your business.

The Statement of Dissolution is a simple one-page form. You’ll need to provide your LLC’s name, LLC’s entity number, effective date (when filed or a future date), a confirmation that the person signing is authorized to, and your name, date and signature.

The certificate of dissolution can be mailed to the Utah Department of Commerce, Division of Corporations, PO Box 146705, Salt Lake City Utah 84114-6705. Alternatively, the form can be brought in person to 160 East 300 South (or 160 E Broadway), Salt Lake City Utah 84111.

There is no fee to file the certificate of dissolution for an in-state LLC. The Division of Corporations has a comprehensive list of business filing fees.

(Both tax matters and business dissolution are handled by the Utah Department of Commerce, rather than the Utah Department of State.)

Conclusion

Make sure you complete all of the steps required for dissolution if your LLC must close. The process for LLC dissolution in Utah is straightforward, but it’s important to correctly complete each step. This is how you can ensure your LLC’s financial and legal liabilities are taken care, and that you’re no longer registered as operating within the state.

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