Dissolving a Connecticut Limited Liability Company (“LLC”) is an important process that requires careful planning and attention to legal requirements. There are several steps involved in dissolving an LLC in Connecticut, and failure to follow the correct procedures can result in legal (and financial) consequences. In this blog post, I will briefly discuss the general requirements for terminating and dissolving a Connecticut LLC and the steps that the members of an LLC should take to ensure a smooth and successful dissolution process.
Is there an Operating Agreement?
The first step in dissolving a Connecticut LLC is to review the business entity’s operating agreement. An operating agreement, although not legally mandated in Connecticut, is a legal document that outlines the rights, responsibilities, and obligations of the LLC’s members and managers. It may contain provisions related to the dissolution of the company, such as requirements for member approval or a specified dissolution and wind-up process. If the operating agreement includes dissolution provisions, the LLC’s member is required to adhere to these provisions in addition to the statutory requirements contained in Title 34 of the Connecticut General Statutes. If there is no operating agreement, then the default statutory procedures would be employed to dissolve the LLC.
When should you vote to dissolve the LLC?
There are myriad ways to dissolve an LLC. Generally, if the LLC has an operating agreement and it does not specify a dissolution process, the LLC’s members must vote to dissolve the company. Connecticut law requires that the members of an LLC vote to dissolve the company by a majority vote, unless the operating agreement specifies something different. Sometimes, an event occurs that triggers the dissolution and wind-up of an LLC’s business, e.g., the death of the owner or a change in the membership interests of the entity.
Did someone file a Certificate of Dissolution?
Once the LLC’s member (or members) has voted to dissolve the company, the next step is to prepare and file a Certificate of Dissolution with the Connecticut Secretary of State. The Certificate of Dissolution is a legal document that officially terminates the existence of the LLC. It must include the name of the LLC, the date of dissolution, a statement that the LLC’s debts and obligations have been satisfied, and the name and address of the person who will serve as the LLC’s agent for service of process after dissolution. The certificate of dissolution once filed shall trigger certain legal notice requirements.
What about the LLC’s Debts and Obligations?
It is extremely important to settle (or have a plan to dispose of) all the company’s debts and obligations before dissolving an LLC in Connecticut, this includes paying off outstanding loans, resolving any pending legal disputes (internal and external), and fulfilling any contractual obligations. If the LLC has outstanding debts or obligations that cannot be satisfied, then the member or members will certainly require the assistance of a bankruptcy attorney well-versed in LLC bankruptcy and liquidations.
Did the accountant file the final tax return?
In addition to legal counsel, it is vital to consult with a tax professional during the dissolution of an LLC. After the LLC has been dissolved, final tax returns must be submitted to the Connecticut Department of Revenue Services and the Internal Revenue Service. The LLC must file a final Connecticut tax return and pay any outstanding taxes, including sales tax and employee withholding tax. The LLC’s members may also be required to report their share of the LLC’s gains or losses on their personal tax returns.
Did the LLC’s business’ license, permits, etc. get cancelled?
Finally, the LLC must cancel all business licenses and permits that were obtained for the company’s operations. This may include licenses and permits from state and local government agencies, as well as professional licenses required for certain industries. Failure to cancel these licenses and permits can result in penalties and fines.
Law Offices of Bradford J. Sullivan, Esq.
The foregoing should not be construed as legal advice. Retaining counsel to assist with the dissolution of a Connecticut Limited Liability Company will ensure careful planning and attention to applicable law. LLC members who are informed appropriately and follow the correct procedures will usually have a successful dissolution process. The facts underlying a business termination vary and these unique circumstances affect how an owner dissolves an LLC. Consulting and hiring an experienced business attorney can help ensure compliance with legal requirements and avoid potential pitfall including but not limited to time consuming and very expensive litigation.