Just as you followed a legal step-by-step process to form a corporation, LLC, and other business entity, you also must follow the proper way on how to dissolve an LLC in Colorado.
The information below is all you need to address your questions about LLC dissolution. We additionally provide reviews about LLC dissolution in other states, such as Pennsylvania in this post. Also, you should read our detailed overall guide on LLC dissolution and check out the best LLC formation services if you are only setting up your business.
3 Steps to Dissolve an LLC in Colorado
The three main steps should provide any LLC with enough information in dissolving their registered business.
Step 1: Check the Operating Agreement
When you formed your Colorado LLC, you were required to build an LLC operating agreement that details every relevant information about the LLC, such as:
- what services or products the business will focus on,
- the first name and last name of all the LLC members (as well as their rights or percentage of revenues)
- steps to the closure of the LLC or corporation
If you do have an LLC operating agreement, just follow the instructions. In most cases, you'll be asked to hold a vote with other LLC members if they are for or against the dissolution. If everyone agrees, you must discuss the formal date of dissolution, handling LLC obligations, and asset distribution. These details and the voting must be recorded in the LLC’s meeting minutes.
If your LLC does not have any written dissolution procedures in its operating agreement, you should consult the default rules in the Colorado LLC Act for further information.
Step 2: Close Your Business Tax Accounts
Any registered business in Colorado will have two or more tax accounts. Before your LLC is officially dissolved by the Colorado State government, you should first settle all fines owed and pay off taxes required with all your business tax accounts.
Depending on your office operations and the size of your company, the following tax record may need to be closed:
- employee withholding tax (if you had employees working for the LLC)
- unemployment insurance tax (if you had employees working for the LLC)
- sales and use tax (if your LLC sold taxable goods or provided taxable service in Colorado)
Closing business tax accounts should be simple - just file a "final return" to the appropriate agency that handles the tax accounts. You cannot move forward with the dissolution process if there is any remaining balance (taxes, penalties, interest, or other fees) under your LLC name.
Step 3: File Articles of Dissolution
Unlike other states that require multiple forms and certificates to dissolve your LLC, you only need ONE in Colorado. The most important document is the Articles of Dissolution.
In Colorado, this document is known as the "Statement of Dissolution." Filing this form means you are voluntarily dissolving the LLC and once processed, your LLC will no longer legally exist.
You don't need to visit the Secretary of State office to file the Colorado Statement of Dissolution. or Articles of Dissolution. Colorado only accepts online submissions.
Under Colorado law, this statement of dissolution/articles of dissolution must include:
- Your LLC's name
- Your LLC's principal office address
- the state ID number of LLC
You must also submit the final meeting minutes of your LLC's dissolution voting online.
Winding Up Your Colorado LLC
Closing tax accounts and filing the actual form to dissolution online are super easy to do. You don't need any complex guides to follow the steps above.
However, winding up the LLC is where the real tasks start. The term "winding up" refers to a group of tasks that any registered LLC, corporation, or business entities need to complete to be able to close the business as cleanly as possible.
Why Do You Need to "Wind Up"?
Colorado requires the Statement of Dissolution, but the wind-up tasks are not required.
However, if you seek legal advice from attorneys, registered agents, and other experienced individuals who have formed an LLC business in the state of Colorado (or beyond) and dissolved, they will give you a list of tasks to do to avoid future lawsuits, penalties, and other potential headaches connected to your LLC business.
These tasks are done on a case-to-case basis and may be done at the start of the dissolution process until months or years after the actual dissolution filing.
What Winding Up Tasks are the Most Important?
Winding up your LLC business can start right after members of your LLC voted for dissolution. In fact, the dissolution can be completed and the LLC still exists, but only to finalize the LLC's outstanding affairs.
These tasks could include:
- Facing criminal, administrative, or civil lawsuits surrounding the LLC
- Settling disputes
- Collecting LLC assets
- Liquidating assets and business properties
- Discharging LLC obligations and liabilities
- Distributing remaining assets among LLC members
These tasks could be completed in as little as a few days to months or years. As such, one or more LLC members will be assigned to handle any or all of the winding-up guides. Your company could even hire third-party service providers (like a realtor or attorney) to help with other more complicated tasks.
Sending Notice to Claimants and Creditors
In Colorado, it is optional to give notice to creditors and claimants that your LLC is undergoing dissolution. However, doing this step is necessary to reduce possible liabilities of LLC members and managers in the future.
A business may give notice in two ways:
- Via a written document (to any known claimants like a creditor, supplier, lender, etc.)
- Via a published notice in a newspaper printed or online (so any unknown claimants would have time to send their claims).
For this notice to be legal, it should indicate that any claim filed against the LLC should take place on or before a particular deadline (at least 2 to 5 years from the date of notice). It should also state that if the claims are not sent by then, the action will be barred.
Colorado LLC Dissolution FAQs
Here are the most-asked questions on how to dissolve an LLC in Colorado:
How Much Does it Cost to Dissolve or Cancel a Colorado LLC?
Filing to dissolve your Limited Liability Company in Colorado only costs $25.
What happens if I Don't Dissolve my LLC?
If you don't dissolve your LLC voluntarily and your business is technically not operational anymore, you can't get away by just ignoring the Periodic Report filing.
If you continuously fail to file the Periodic Report, your LLC business name will remain classified by the Colorado Secretary of State as “Delinquent” indefinitely. The LLC will be involuntarily dissolved after 400 days.
While there is no penalty in Colorado for just abandoning your LLC, you would have to pay a $100 processing fee for the Statement Curing Delinquency if you suddenly decide to revive the LLC and return it to good standing.
Is a Tax Clearance Required in Dissolving a Colorado LLC?
Other states require LLCs to submit tax clearance along with the Articles of Dissolution. However, the Colorado Department of Revenue does not require any tax clearance to dissolve an LLC in Colorado.
How Long Does the Dissolution Process Take?
Colorado's Secretary of State processes dissolution very quickly. In fact, the documents you filed online are often processed in real-time. This means that a day after finalizing your LLC dissolution, anybody can take and use your business name for their operations.
What Other Optional Steps Should LLCs Know?
You can dissolve your LLC in Colorado successfully, but if your LLC registered the business in other states, you are required to file a form for each state your business is qualified to operate in. Doing so will terminate your legal right to conduct business in those states.
The form you need to file may be called a number of terms, such as:
- application of withdrawal
- certificate of surrender of right to transact business
- termination of registration
- certificate of termination of existence
The good news is every state has a website and allows you to file online, so you don't need to visit every Secretary of State office in person. Just make double-check the information on how to file in those respective states to avoid errors.
Failure to file these additional articles of dissolution forms could lead to liabilities of the LLC members, unwanted annual report fees (and penalties), as well as continuous business taxes.
Help in Closing Your LLC in Colorado
If the steps on how to dissolve an LLC in Colorado are not enough to help in your LLC dilemma, a registered agent service or business attorney could help with every step of the way. Their expertise may not mean free legal advice, but it is ideal to deal with your LLC issues upfront along with experienced help than spend more money in the future on penalties, significant claims, or even lawsuits.