How do you Dissolve, Wind up, and Terminate a LLC?
The end of the life cycle of a limited liability company (LLC) requires compliance with both the company operating agreement and the Arizona Revised Statutes. Most operating agreements will set forth the details of when and how a LLC is to dissolve, wind up, including the liquidation and distribution of its assets to the members. If none is specified, a LLC can be dissolved by a majority in interest of the members and by one or more members that on dissolution of the company and liquidation of its assets would be entitled to receive more than one-half of the value of all assets to be distributed to all members on liquidation. See A.R.S. § 29-3701(A).
Does a dissolution terminate an LLC?
A dissolution of the LLC does not mean the LLC is terminated. Rather dissolving a LLC begins the wind up of the LLC’s activities and affairs. Unless the dissolution is rescinded (more on that later), the company continues after dissolution only for the purpose of winding up. Thus, regular business activity is to cease.
What does winding up an LLC mean?
Under A.R.S. § 29-3702 in the winding up of the LLC’s activities and affairs, the LLC shall discharge the company’s debts, obligations and other liabilities, settle and close the company’s activities and affairs and marshal and distribute the assets of the company. The LLC may also deliver a Notice of Winding Up to the Arizona Corporation Commission. The LLC can also (1) preserve the companies activities, affairs, and property as a going concern for a reasonable time; (2) prosecute and defend actions and proceedings as a going concern for a reasonable time; (3) transfer the company’s property; (4) settle disputes by mediation or arbitration; and (5) perform other acts necessary or appropriate to the winding up. Winding up will likely include transferring or assigning remaining property to the members after all payments to creditors. Any transfer, distribution, or assignment should be done by written instrument.
When do you file the Articles of Termination?
Once all of the known property and assets of the limited liability company have been applied and distributed, only then should the Articles of Termination be filed with the Arizona Corporation Commission. The Articles of Termination form supplied by the Arizona Corporation Commission requires a statement under penalty of perjury that all known properties and assets have been applied and distributed in accordance with the Arizona Revises Statutes. Additionally, a $35 filing fee is required.
Wait... wait.... what if I want to rescind a dissolution?
Unless the articles of termination have been filed and are effective, a court order under A.R.S. § 29-3701 ordering a dissolution, or an administrative dissolution under A.R.S. § 29-3708, then you can rescind a dissolution. If the operating agreement does not set forth the requirements to rescind a dissolution, the affirmative vote or consent of each member to rescind the dissolution is necessary. Additionally, if a notice of winding up has been filed but not become effective, a statement of withdrawal that is applicable to the notice of winding up can be filed. Alternatively, if a notice of winding up has been filed and the notice is effective, a statement of correction can be filed stating the name of the company and that dissolution and winding up have rescinded is necessary.
Thunderbird Law can prepare the documents necessary to terminate your Arizona limited liability company. This includes preparing a consent to dissolve, assignments of property, and the final articles of termination. A flat fee price to prepare these documents is $495. To hire Thunderbird Law to prepare these documents contact us at 480-455-3520 or click here to complete the online form.
The termination of an LLC can have tax implications and speaking with a tax advisor is recommended.