Dissolution of a Limited Liability Company

 In Blog, Business Law

Sometimes it becomes necessary to shut down your limited liability company (LLC). However, there are steps that need to be followed to properly dissolve a LLC. Here are the general steps involved in the LLC dissolution process in California.

What triggers the dissolution of a LLC?

There are several events that might trigger the dissolution of a LLC. It must be dissolved in these scenarios:

  • Because of an event specified in the operating agreement or the articles of organization
  • A decision to dissolve by a vote of the members
  • If the LLC has no members for 90 consecutive days
  • A decree of judicial dissolution

The person or persons responsible for carrying out the dissolution must be careful to wind up the LLC’s affairs according to all existing legal requirements.

Who carries out the process?

If the dissolution is the result of judicial decree, it will be carried out by those indicated by the decree of dissolution. Otherwise, the managers are responsible if they have not wrongfully dissolved the LLC. If there are no managers to carry it out, whoever signed the articles of organization can fill this role. If more than one person signed, then a majority of signers may perform the task.

What is the procedure for winding up the LLC’s affairs?

These are the main steps involved in winding up the affairs of a LLC during dissolution:

  1. Give written notice of winding up to all known creditors and claimants whose addresses appear in the LLC’s records
  2. Determine that all known debts and liabilities of the creditors of the LLC (including debts and liabilities to creditor members) have been paid or adequately provided for
  3. Distribute the remaining assets among members according to their respective rights

Certificate of dissolution

A certificate of dissolution must be signed and filed with the Secretary of State. It is not required if dissolution is by the vote of all the members and a statement indicating this reason is added to the certificate of cancellation (discussed below).

Certificate of cancellation of articles of organization

If the LLC has not conducted any business, a certificate of cancellation may be signed and filed with the Secretary of State. It must be filed within 12 months of filing the articles of organization.

Continued existence of the LLC

A dissolved LLC continues to exist for the following purposes:

  • Winding up remaining affairs
  • Prosecuting or defending lawsuits or other actions to reconcile debts and obligations
  • Transferring property
  • Dividing the remaining assets

A LLC continues to exist indefinitely for the purpose of being sued to quiet title. A judgment in a quiet title action is binding against anyone with an interest in the LLC.

Helix Law Firm can help with business entity requirements

We can help you properly dissolve your limited liability company. We can also form LLCs and other business entities, as well as make sure your entity stays in compliance throughout its existence.

If you’re interested in learning more about how Helix can help, please call us at (619) 567-4447 to schedule a free consultation.

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