Illinois LLC Dissolution | To Cease Operations and Stop Tax Obligations

The Illinois LLC dissolution is a necessary step if you want your limited liability company to cease operations and stop tax obligations.

All LLCs are formed when you file an Articles of Organization and the Secretary of State approves your LLC application. Just like the formation of your LLC (see ‘Best LLC Formation Service’ review and a post on Legal Nature online agent ), you need to undergo a similar method to dissolve an Illinois LLC.

The termination of your business entity in the state of Illinois doesn’t just happen once you decide to close shop and stop providing services or selling your products. Any limited liability company in Illinois must go through the following guidelines to get officially and legally dissolved.

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How to Dissolve an LLC in Illinois in 5 Steps

There are several ways a limited liability company can be dissolved in Illinois.

According to the Limited Liability Company Act of Illinois’ Code, LLCs can be dissolved by:

  • An event specified in the operating agreement. This could be a pre-scheduled dissolution, or in the event of significant financial loss, or misunderstanding between LLC members.
  • Voting by a majority of LLC members
  • A judicial decree (court-ordered dissolution)
  • An event that makes it illegal for the LLC to continue its operations within Illinois

In most cases, the Operating Agreement (the document drafted at the formation of your LLC) will detail everything you need to do in the event of dissolution. Local laws published by the Illinois Secretary of State could also shed light on your company’s dissolution process.

The basic steps to dissolve an Illinois LLC is as follows:

Step 1

Prepare to Dissolve the Business

Set a meeting with members of the LLC. Vote for the dissolution of your business. The minutes of this meeting must be recorded. Discuss everything that will happen should you go forward with dissolving the LLC, such as what tasks need to be done, how assets are to be liquidated and divided, and other important legalities.

For bigger LLCs, an attorney could assist you in understanding the Articles of Organization, or guide you through all stages of the LLC’s closing.

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Once there is a resolution to dissolve, you must then draft the Articles of Dissolution.

Step 2

Give Notices to Creditors and Claimants

Any claimant has to be notified about the upcoming dissolution process. This is important because as LLCs, individuals, service providers, suppliers, or other third-party companies you work with only know your business by company name. If you had prior payment arrangements, these claimants and creditors must be aware of where to send invoices and other documents.

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On the notice that you’re required to send, provide instructions on how to submit a claim and the deadline for submissions. In Illinois, claimants are given 120 days or less from the dissolution date. Make sure you write a statement that notifies claimants the LLC will no longer receive new claims after the listed deadline date.

Step 3

File Articles of Dissolution with Illinois Secretary of State

The Illinois Secretary of State already has a form readily-available for LLCs looking to dissolve.

LLCs must download and fill up Form LLC 35-15 Statement of Termination (also known as Articles of Dissolution). You should then file two copies of the completed Statement of Termination form with the Illinois Secretary of State.

Aside from your Statement of Termination documents, the filing should also include a check for a $5 filing fee made payable to the “Secretary of State.”

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You could file this by mail or visit the office in person at this address:

  • Secretary of State
  • Department of Business Services
  • Limited Liability Division
  • 501 S. Second St., Rm 351
  • Springfield, IL 62756

Expect the Illinois Secretary of State to process your Articles of Dissolution within 7 to 10 business days.

Step 4

Remove All LLC’s Liabilities and Obligations

According to the LLC Act of Illinois, even if your business is still in the process to terminate the LLC, your company continues to exist so that you can fulfill several “winding up” tasks. These tasks usually have one goal – to remove liabilities and obligations of an LLC, so this could include:

  • Preserving business offices for a specific time
  • Defend or prosecute lawsuits, settle disputes and any other legal issues against the LLC
  • Sell or transfer properties of the LLC;  Finish lease contracts if the business was renting an office
  • Pay all financial obligations and settle debts (if any)
  • Create provisions to pay for liabilities
  • Distribute assets to LLC members and shareholders

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Depending on the business standing at the time of the LLC closing, these winding up tasks could take weeks or months. The good thing is that you can dissolve an Illinois LLC officially and may still fulfill all obligations Illinois requires.

Step 5

Close bank account, tax accounts, and other similar accounts

One of the most important things you need to do when you close any business (whether it’s an LLC or corporation) is to include the closure of all business accounts as well. This step will reduce or avoid possible legal issues in the future.

These business accounts include (but are not limited to):

  • Business bank accounts
  • Illinois permits and licenses

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Lastly, you must settle all legal fees and taxes required from your Illionois LLC business.

Illionois LLC Dissolution FAQs

Most companies hire the help of a registered agent to deal with the closing of an Illinois LLC business. But for some LLCs that assigned an LLC member to oversee the process, the added information below should be useful.

What is Illinois Dissolution?

The Illinois Secretary of State approves the application/formation of every LLC. When this legally-registered Illinois LLC goes through a dissolution process, the filing also goes through the Illinois Secretary of State.

This way, the local government is made aware that a particular Illinois LLC is no longer registered to operate a business within the state, or that the business no longer has to pay tax and other fees associated with running an Illinois LLC.

paperwork

How much Does it Cost to Dissolve an LLC in Illinois?

Illinois requires all LLCs to pay a filing fee of $5 to dissolve an Illinois LLC business. It is actually one of the cheapest dissolution filing fees in the country.

If you wish to expedite the process, you may add another $50 by check. Note that to take advantage of this expedited, 24-hour processing, you must physically visit the office below:

  • Secretary of State
  • Department of Business Services
  • Limited Liability Division
  • 501 S. Second St., Rm 351
  • Springfield, IL 62756

Does my LLC need to Get Tax Clearance?

Illinois LLCs or companies do not need tax clearance when they dissolve. However, when you file the Articles of Dissolution, the Secretary of State will not just sign your request. Instead, they will first make sure that the tax status of your registered Illinois LLC is fully paid before dissolving.

As such, before you file the form, you should first:

  • File the business annual report with the Illinois Secretary of State.
  • Close the LLC tax account by checking the “final” return box on the IRS form
  • Settle any required taxes such as:
  • Unemployment insurance tax or employment withholding tax (if you had employees working for your Illinois LLC,
  • Sales & Use Tax if your Illinois LLC sold taxable goods or services in the state of Illinois.

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If you are unsure of the LLC’s remaining tax obligations and annual reports required, better seek assistance from the IRS or the Illinois Treasury Department.

What Happens if my LLC is Dissolved?

If you plan to use the business name in the future, be aware that once the State of Illinois has granted the request to dissolve your LLC, your business name becomes available for another person or company to claim.

Dissolving a Foreign Illinois Limited Liability Company

The guide above talks about dissolving a domestic Illinois LLC (or an LLC formed in Illinois). If your LLC was formed in another city or state, but you registered to operate as a business in Illinois, your Illinois LLC is considered a foreign LLC.

If this is the case, you have to follow a slightly different process, which starts with downloading the Application for Withdrawal Form (or Form LLC-45.40).  File two copies of this form, along with a check for $5 made payable to the Secretary of State. Then mail these documents or bring them in person at:

  • Secretary of State
  • Department of Business Services
  • Limited Liability Division
  • 501 S. Second St., Rm 351
  • Springfield, IL 62756

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Wrap Up

The steps to dissolve a domestic or foreign Illinois LLC are very straightforward.

What takes the most time is handling LLC’s assets, facing legal troubles, liquidating remaining properties, settling unpaid fees or IRS requirements (especially if the reason for the termination is bankruptcy).

If no member of the LLC is available to go through the dissolution steps above, a business may hire a registered agent (or any person authorized by the LLC members) to dissolve the Illinois LLC on their behalf.

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