How to Dissolve an LLC in Illinois

Not every limited liability company lasts indefinitely. No matter how much time and effort you put into building your business, there may come a time when you decide it’s the right time to close it. However, it’s important to understand that there are certain steps that must be followed when it comes to dissolving an LLC. Failure to complete the dissolution process and wind up the company’s affairs can ultimately mean the business continues to exist under Illinois law — leading to tax problems and liability issues in the future.

Reasons for Dissolving an LLC

When you file the necessary paperwork to start an LLC in Illinois, your business is officially registered with the state. But while you may have started the company with a purpose or specific vision in mind, there can be many reasons to close an LLC. To end the company’s existence and stop the state from recognizing it as an entity, you will need to go through the dissolution process and wind up the company’s affairs.

Specifically, the reasons for dissolving an LLC should be addressed in the company’s operating agreement. In the event the company is no longer profitable, or members cannot agree on important decisions concerning business operations, it might be time to close the company. Other reasons for dissolving an LLC can include disagreements concerning the future of the company or how to distribute profits. In addition, an LLC might also be dissolved due to the death of the owner, decreasing demand for the LLC’s products or services, or another reason that makes it impossible to run the business.

What are the Steps for Winding Up an LLC?

For effective LLC dissolution, seek guidance from Litico Law Group in Rolling Meadows. We offer dependable representation for various business needs across Illinois. Schedule a consultation and explore how we can help your business.

An LLC can’t simply be closed by shutting the doors of the business — there are specific dissolution and wind-up procedures that must be followed. If you’re considering dissolving an LLC, it’s vital to review the operating agreement. This document should address the LLC’s dissolution process and specify the triggering events that can lead to dissolution.

The steps in winding up an LLC include the following:

• Vote to dissolve the LLC — The first step that must be taken to dissolve an LLC is for the members to officially agree to close the company. In many cases, the operating agreement will specify how the vote will happen, when the meeting will occur, and how members will be notified regarding the vote. Under Illinois law, an LLC can be dissolved with a unanimous vote by all members.
• File final tax returns — As you close the LLC’s financial affairs, all required state tax returns must be filed, including the following if applicable: the Illinois Withholding Income Tax Return, the Sales and Use Tax Return, and the Corporation Income and Replacement Tax Return. The Illinois Secretary of State requires an LLC to obtain tax clearance before a company can be closed, showing that you’ve paid all taxes that are due. You will also need to file the required final federal tax returns.
• Inform creditors — Creditors of the LLC must be notified that the company is being dissolved. Illinois law also requires a minimum of five years notice be given to unknown creditors.
• Wind up business affairs — The wind-up process may look different for every business, depending on the type of operation. Typically, winding up includes satisfying remaining invoices, distributing employee severance packages, notifying customers, closing bank accounts, canceling any business licenses, and negotiating the remaining terms for any finance agreements. Steps must also be taken to settle any debts that are owed.
• Distribute remaining assets to members — Once taxes, debts, and other obligations have been paid, the remaining assets can be distributed to the LLC’s members. The operating agreement should specify how the funds are split.
• File Articles of Dissolution — The last step in closing an Illinois LLC is filing dissolution paperwork. In order to officially dissolve the LLC, an Illinois Statement of Termination must be submitted to the Secretary of State after winding up the business. However, an LLC must be in good standing to be voluntarily dissolved. The company’s status must not have been revoked or expired, and the LLC must not have been administratively dissolved.

LLC dissolution and completing the wind-up process can be complex — but it is necessary to ensure these procedures are carried out properly to avoid incurring liability and unintended consequences. Critically, as long as a company still exists, it must file annual reports, pay taxes, and satisfy its legal obligations. It’s essential to have a skillful business attorney by your side to help ensure you comply with the necessary requirements for closing your LLC.

Contact an Experienced Illinois Business Attorney

If you are considering dissolving an LLC, it’s important to have the guidance of an experienced business law attorney to help you navigate the process. Located in Rolling Meadows, Litico Law Group provides reliable representation to LLCs and entrepreneurs throughout Illinois for a wide array of business matters. We welcome you to contact us by filling out our online form or call 847-307-5942 to schedule a consultation to learn how we can assist you.