If you need to close a registered limited liability company and are looking for ways how to dissolve an LLC in Alabama legitimately, then continue reading this quick guide.
So why do you need to dissolve your LLC, anyway?
In Alabama law, when the Secretary of State approved your filed Articles of Organization, the LLC becomes legally allowed to operate in the state of Alabama. The process involved filing paperwork, paying fees, and preparing bank accounts and other legalities.
However, if you intend to close your company for whatever reason, you also have to undergo certain steps, so the LLC will no longer have to pay taxes to the State of Alabama. And if you want to leave that out to the experts, check out these trusted LLC formation services. Also, find time to read our separate IncFile review, Rocket Lawyer review and Swyft Filings review, just to name a few.
6 Steps to Dissolving an Alabama LLC
Before everything else, you must get out a copy of your LLC's operating agreement. If your foreign or domestic LLC has been operating for a while, LLC members may have forgotten the specific details written on this document.
You'll need the operating agreement because:
- it regulates the LLC affairs (how it's managed, how assets are used/shared, etc.)
- it guides the management on how to go about the dissolution process
- it overrides Alabama law
Without an operating agreement, you follow state rules instead.
Here are 6 steps to dissolve your LLC properly:
Draft the Articles of Dissolution
The Articles of Dissolution is the document that includes:
- The name of the company
- Alabama LLC entity ID number - To find this, go to the Business Services page, click on Business Entity and Name Search, click on Entity Name, enter the name of the entity in the appropriate box, and enter. Click on the number and verify that this is the correct entity.
- The filing date of the certificate of formation - If you don't have a certified copy of the certificate of formation, check with the Alabama Secretary of State and get at least two copies.
- Reason for dissolution - You have to provide a one-sentence reason why you wish to dissolve your LLC. The Articles of Dissolution doesn't really require an essay-long explanation since the space provided is just minimal.
- The effective date of dissolution - LLC members should have chosen this date of dissolution effectivity and not the Alabama Secretary of State.
Hold Meetings with Important LLC Associates
Filing a dissolution cannot be the decision of only 1 LLC member. You need to hold meetings (with minutes recorded) so that:
- Voting can occur. A majority of LLC members (listed in the articles of the organization) must approve the plan to dissolve.
- The shareholders are made aware and agree to the dissolution plan
Notify Creditors of Dissolution Plans
Any company that plans to close up for good must let its creditors know about its plan to dissolve. For known creditors, the LLC members must write a letter stating this fact, along with the business name, claim deadlines, other dissolution details, and a mailing address where creditors could submit their claims.
For unknown claimants (companies or individuals the Alabama LLC has no record owing money or service to) but would want to file claims against your LLC, it is best to publish a notice of dissolution. (Note that an Alabama LLC isn't required to do this by law.)
File Reports and Tax Returns
The Alabama Secretary of State will not let any Alabama LLC go through the dissolution process if the LLC has not closed its business tax accounts with the state of Alabama.
Of course, to do this, the LLC must settle any outstanding taxes and/or fines. The Alabama LLC must file a final tax return to close the accounts.
Additional types of tax the business must pay up would depend on the operations of your LLC. For example:
- An LLC with employees should check if it still owed unemployment insurance and employee withholding tax
- An Alabama LLC that sold goods or services within the state should check if it has Sales and Use tax
Although you need to pay tax before dissolving your corporation or business, the good news is you don't need to obtain clearance from the Alabama Secretary of State or IRS. In other states, tax clearance is a requirement.
Hire a Certified Professional Accountant (CPA) if the LLC has several types of taxes needed to be paid, so the LLC could navigate through this process without hassle.
Download and print the Articles of Dissolution
The Articles of Dissolution for domestic Alabama LLC is pretty straightforward, but you need to fill out all the spaces provided.
When ready, you mail one (1) signed original of the Articles of Dissolution and one (1) copy of the completed Articles of Dissolution form along with a self-addressed, stamped envelope with the filing fee of $100.00 (credit card, check, or money order) to the:
- Secretary of State,
- Business Services,
- P.O. Box 5616,
- Montgomery, Alabama 36103-5616.
If you're going to pay for the filing of the Articles of Dissolution via credit or debit card, note that your filing will not be indexed if your card company does not authorize it.
All the steps above are actually part of a larger process called Winding Up. It involves all the steps necessary for an LLC to be legally dissolved. Once you've mailed the Alabama LLC dissolution documents, there are some additional tasks an LLC may need completing, such as:
- Distribute remaining assets to shareholders
- Cancel business licenses and permits
- File IRS Form 966, which informs the IRS (federal government) that your LLC has been dissolved
- Cancel IRS account connected to the LLC's Federal Employer Identification Number (EIN)
Alabama LLC Dissolution FAQs
Here are two of the most frequently asked questions about Alabama LLC dissolution:
How Much Does it Cost to Dissolve an LLC in Alabama?
The standard filing fee to dissolve your limited liability company is $100, paid to the Office of the Judge of Probate in Alabama Secretary of State.
If you need to expedite the process, you have to pay another $100. Note that some counties do not have expedited dissolution, so you may call the Office of the Judge of Probate to be sure.
It would cost more if you go through the process with an Alabama registered agent, but it varies between providers.
How Long Does it Take to Dissolve Your LLC?
The dissolution process could be done as quickly as 3 weeks or could extend months, depending on how long you're able to agree with LLC members (and/or LLC shareholders), the time you have to close accounts and settle financial obligations, how long you're able to take care of assets, and so on.
Once you've submitted the dissolution form, expect the office of the Secretary of State to process your LLC dissolution filing within 3 to 4 business weeks.
After the recording of your Articles of Dissolution, your Alabama LLC will be given 120 days to file a revocation. If you not, the LLC will be dissolved permanently and other individuals/companies could register your business name as theirs.
Dissolving LLCs in Alabama is an easy, but necessary process. If the documents are not filed properly and taxes are not settled, the LLCs that used to be registered but discontinued operations would still be in legal trouble and required to pay penalties to the state of Alabama.
All LLCs must pay a Business Privilege Tax return to the Alabama Department of Revenue. If you ceased operations of your company without submitting dissolution documents, the Alabama government will not be informed about the LLC's "closure."
And if your tax return isn't filed and paid when due, your LLC will be given a 10% penalty fee of the amount due or $50, whichever is greater. The amount you owe will just increase by a 1% penalty each month until you have it paid. And none of the LLC members pay up, your LLC information will be brought to the Collection Services Division, followed by a court order to seize whatever assets the LLC has left to satisfy what your company owes the Department of Revenue.
Unlike other states, Alabama doesn't dissolve businesses administratively. Instead, you'll be faced with expensive penalties and litigation until you start the proper dissolution process with the Secretary of State.
Dissolving LLCs properly is a good business practice no matter what state your LLCs were filed and formed.