Texas Corporate Law Attorneys Assisting Clients with Closing LLCs
Sometimes our business ventures do not go as planned, and it comes time to cease doing business altogether. If you are in this situation and your current business structure is a limited liability company (LLC), it probably means that you are wondering how to close an LLC in Texas. Many businesses in Texas are LLCs since this is one of the least complicated business structures to form.
When you form an LLC, you can have a number of “members,” or owners, without any limit on the total number of owners in the business. Many business owners in Texas also favor LLCs because they have a lot of the simplicity and flexibility that comes with a partnership, while also having some of the liability protections associated with a corporation, according to an article in Nerdwallet. However, like other businesses, LLCs can need to close for a number of different reasons.
If you are thinking about ceasing business operations, you likely have many questions about how to dissolve an LLC in Texas. Closing an LLC is an extremely complicated process, and the steps vary from state to state.
As such, it will be very important to work with an experienced Texas business lawyer who can help you through the complex requirements of dissolving your LLC. Failing to close an LLC property can lead to substantial liability issues in the future that all owners will want to avoid.
How to Close an LLC in Texas?
Unlike other states, there is no specific LLC law in Texas that governs the closing or dissolving of an LLC. Instead, Texas business owners who are dealing with LLC issues typically must refer to the Texas Business Organizations Code, which governs all LLCs in addition to partnerships, corporations, nonprofits, and other business structures in the state of Texas.
Given the complications of dissolving an LLC in Texas, it is important to learn the steps that the LLC must take in order to close properly. We will run through the basic requirements to close an LLC, but keep in mind that these are only the essential requirements, and you should always work with a business lawyer in Texas as you work to dissolve your company.
Event That Triggers the “Winding Up” of Your LLC
In order to dissolve your LLC in Texas, an event will need to occur that triggers that “winding up” of your company. To put this in more basic terms, something needs to happen to require you to close or dissolve your LLC. When we say “winding up,” we simply mean getting all of the affairs of the LLC in order so that it can properly close. We will say more about how winding up works shortly.
In terms of the triggering event, in many cases, the members (or partners) in the LLC voluntarily decide to dissolve the LLC. This voluntary decision can be the event that triggers the winding up. Keep in mind that your Company Agreement and Certificate of Formation may indicate how many members must voluntarily agree to dissolve the LLC in order for it to be valid.
You must abide by this if you do decide to close the LLC based on a voluntary decision by the members. Other potential events that can occur to require the dissolution of the LLC include, for instance:
- Event occurs that was specifically cited in your governing documents to require the LLC to wind up;
- Certificate of formation had a specific term of duration, and that end date is reached;
- Texas law requires winding up; and/or
- Court order requires the LLC to be dissolved.
The Texas Business Organizations Code contains specific information about winding up and termination provisions that must be followed.
“Winding Up” the Affairs of the LLC
Once you begin winding up tasks, the LLC needs to stop operating according to Texas law (aside from any tasks that are necessary for dissolving the company). Under the Texas Business Organizations Code, examples of winding up tasks include but are not limited to the following:
- Sending written notice of winding up to any claimants;
- Selling off property of the LLC;
- Handling the LLC’s remaining liabilities and obligations, which can including distribution of LLC property;
- Distributing remaining LLC property to members according to the terms of the governing documents and certificate of formation;
- Dealing with outstanding lawsuits either against the LLC or those in which the LLC is a plaintiff; and
- Any additional actions necessary to wind up the LLC.
Tax Clearance and Certificate of Account Status from the Texas Comptroller of Public Accounts
After you have finished all of the winding up tasks required to close the LLC, then you will need to request a Certificate of Account Status from the Texas Comptroller of Public Accounts. The Certificate essentially indicates that the LLC has paid its taxes and that it can be dissolved.
To obtain a Certificate of Account Status, you will need to file Form 05-039. The Form can be submitted online (where you will need to wait between 4-6 weeks to obtain the Certificate) or as a physical copy at a Comptroller Field Office (where you can obtain the Certificate immediately).
Signing and Submitting the Certificate of Termination
Once you have the Certificate of Account Status, you will need to file a Certificate of Termination with the Secretary of State. When filing the Certificate of Termination, you will need to include the Certificate of Account Status. The Certificate of Termination can be submitted online, through the mail, or through fax.
Paying the Final Fee
Once all of the winding up tasks have been completed and the required paperwork has been filed, you will need to pay a final fee to the Secretary of State to dissolve your LLC. The filing fee is $40. You can pay by check or credit card.
Seek Guidance from a Texas Business Law Attorney
Dissolving an LLC in Texas is a complicated process, but a Texas business law attorney can help. Contact Lindquist Wood Edwards LLP to learn more about how we can assist you as you go through the process of dissolving your LLC.