Business entities in Kentucky are required by law to formally close, so if your LLC board of directors has decided on dissolution, learn how to dissolve an LLC in Kentucky and keep your name in good standing with the state. Also, before you read on, make sure to check out this general guide to dissolving your LLC. Meanwhile, if you are just about to set up your company check out our trusted LLC formation services reviews.
If you decide to just close the doors of your business and not handle the paperwork, not only will you (and the members of your LLC) have a bad standing in Kentucky, everyone involved may have to pay more fees or worse, be liable in lawsuits, claims, and other obligations that the LLC should have finalized. In addition, find out if that's the case when dissolving your LLC in Ohio. It's also worth noting that some states like Colorado here accept only online dissolution submissions and that to close your Pennsylvania LLC you aren't required to notify creditors.
What is Kentucky LLC Dissolution?
A Kentucky LLC dissolution (see also neighboring Illinois LLC dissolution) is a process of legally and officially closing your LLC business and informing the local government (in this case, Kentucky) all about it.
Dissolution is an important step in the closure of any business since the IRS and other agencies will not be aware if you just closed shop and just avoided filing tax returns or other business obligations. A Kentucky LLC that hasn't been dissolved will continue to have business records, so taxes, business permits, and other obligations must be continuously met.
Why do I need to Dissolve a Kentucky LLC?
If you do not dissolve a Kentucky LLC, you (or other LLC members) as business owners could be held personally liable for any outstanding debts, lawsuits, and liabilities of your limited liability company.
In addition, dissolving an LLC gets you out of financial obligations (taxes, annual reports, and similar fees) you may be required to pay regularly. This is particularly important if bankruptcy, debt, or other similar financial problems have led your LLC to dissolution.
Which Kentucky Agencies Should I Talk to?
LLCs are not created equally, which means you might need to coordinate with additional agencies to clear your business from all obligations. However, most LLCs should
- Kentucky Secretary of State - When you formed your Kentucky LLC, you filed the form along with other requirements at the Kentucky Secretary of State. Now that you are filing to have your business entity dissolved, the Kentucky SoS will still be the main agency handling your request for dissolution.
- IRS - One major obligation of any business is Federal tax. You have to check with the Internal Revenue Service (IRS) for past and current obligations, so you could pay them quickly and move the dissolution process forward.
- Kentucky Department of Revenue - This is also the case with the local Department of Revenue in Kentucky. Check your LLC's obligations and see if your taxes are up-to-date before filing for LLC dissolution.
Sometimes, the LLC may also need to communicate with the County Clerk's Office or Kentucky Department of Unemployment Insurance (if your LLC employed people during its operations). Take note of the document requirements these agencies may request from your LLC.
3 Steps on How to Dissolve an LLC in Kentucky
All registered LLCs were required to submit an operating agreement during the LLC formation phase. No company was allowed to form an LLC without this important document. Fortunately, the operating agreement details the steps LLCs must follow in the event of a dissolution.
1. Things to Do Before Filing Dissolution
As a Kentucky LLC, you must first handle a slew of different business obligations and settlements before moving forward and filing the LLC dissolution.
These include (but may not be limited to):
- Liquidating business assets
- Settling any LLC liabilities
- Closing off LLC business bank accounts
- Paying off business debts to creditors
- Paying employee salary and benefits
- Sending legal notifications to known claimants by mail, or unknown claimants by way of publication
- Canceling business permits and licenses across different agencies
- Distribution of remaining assets between LLC members
To dissolve a Kentucky LLC, the Secretary of State will check not only the Articles of Dissolution but also check if the business has cleared all taxes and fulfilled reporting obligations.
2. Clear Taxes
All Kentucky LLC businesses are required to maintain tax accounts from different state departments. Before your dissolution filing can be processed, you will be asked to pay taxes owed or fines recorded in any or all of these tax accounts.
- If your Kentucky LLC had employees during its operations, see if you are up-to-date with "Employee withholding tax" and "unemployment insurance tax" payments.
- If your Kentucky LLC sold taxable goods or services, check if the company has "Sales & Use Tax" payments needed to be settled.
- If your LLC is registered to do business in Kentucky and in other states, you might also need to check the financial obligations your LLC has with those states.
- Lastly, you have to download and file form 966 with the IRS. This will officially cancel the account associated with the federal tax ID for your Kentucky LLC.
If you are having trouble finding your LLC's tax accounts or facing issues with different agency procedures, it might be best to seek the help of a Certified Public Accountant.
3. File Articles of Dissolution
For a Kentucky LLC to be formally dissolved, you must file the Articles of Dissolution to the Kentucky Secretary of State. The process is slightly different for a domestic LLC (a business entity formed in Kentucky) and a foreign LLC (a business entity formed in another state).
The Secretary of State provides forms for dissolving a business entity (articles of dissolution), dissolving a foreign business entity (Certificate of Withdrawal of a Foreign Business Entity), and for amending a business entity.
How to Dissolve a Domestic Kentucky LLC
If your limited liability company is domestic to the state of Kentucky, you need to download the Articles of Dissolution and fill out this document with your LLC business name, the effective date of dissolution, and the signature of your authorized LLC representative.
When finished with the Articles of Dissolution, you must prepare a check for $40 filing fee made payable to the Kentucky State Treasurer (State of Kentucky) and mail it to the following address:
- Michael Adams
- Secretary of State
- P.O. Box 718
- Frankfort, KY 40602-0718
You can also deliver your documents in person at the:
- Room 154, Capitol Building
- 700 Capital Avenue
- Frankfort, KY 40601
The Kentucky Secretary of State typically processes the Kentucky LLC dissolution documents for up to three business days.
How to Dissolve a Foreign LLC in Kentucky
If your LLC was formed outside of Kentucky but is qualified to transact business within this state, you have to file a Certificate of Withdrawal of a Foreign Business Entity. It is similar to the Articles of Dissolution used for any domestic Kentucky LLC. This certificate includes the name of your LLC, state or country of formation, assigned mailing address where dissolution certificate may be sent, the effective date of the dissolution, and the signature of your authorized representative.
Your foreign limited liability company would have to pay a $40 filing fee as well. Make the check out to “Kentucky State Treasurer" and sent it out to the same address as domestic LLCs:
- Michael Adams
- Secretary of State
- P.O. Box 718
- Frankfort, KY 40602-0718
Wait for the filing to be processed from 1 to 3 business days.
What Happens Once My LLC is Officially Dissolved by the Kentucky Secretary of State?
After closing your registered LLC in Kentucky, that limited liability company will be canceled and all its remaining rights, powers, and privileges that are given as a tax-paying business entity will end.
A certification of dissolution will be sent to your assigned mailing address and at the date of your LLC's dissolution, you can no longer conduct business using that LLC in the state of Kentucky.
Why Voluntary Dissolving the LLC is better than Administrative Dissolution
The Kentucky Secretary of State's job is to take note of business entities' records and process the formation (or dissolution) of a corporation, LLC, and other business entities that want to operate within the state.
If your LLC fails to submit annual reports on the due date, the SoS will immediately place your LLC in bad standing. By this time, your company will receive a notice giving you 60 days to fulfill your obligations. But if you still fail to respond (or submit the required annual reports), your LLC will be administratively dissolved by the Secretary of State.
This means even if you have no intention of dissolving your LLC, the state of Kentucky will do it for you for failing your obligations. The resolution to dissolve issues like this is to file a reinstatement application (with a $100 file fee), which can be done through the online Organization Search. Note that you will also be asked to pay the filing fees of each annual report your LLC missed paying.
To prevent this from happening, you can either hire the services of a registered agent who will serve as the LLC's representative on behalf of the company so you will never forget about LLC obligations again or follow the procedures of dissolving an LLC in Kentucky and "close" your business for good.