Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Alabama are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Alabama has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Alabama LLC dissolution process? Are there different processes for businesses based in Alabama and those expanded from other states? When do you need to dissolve your LLC? We’ll answer all of these questions and more in this article.
How Do You Dissolve an Alabama LLC?
When closing a business registered as an LLC in the state of Alabama, you’ll need to take care to dissolve your business exactly as the state outlines. The most important part of this process is filing the correct paperwork with the relevant legal entities, but this is far from the only vital step.
In addition to filing documentation of your Alabama LLC dissolution, you will need to liquidate the assets of your business, notify all individuals and business entities that have an interest in your company, and resolve any outstanding liabilities with vendors, suppliers, or clients.
There are potentially severe penalties for failing to comply with the Alabama LLC dissolution process, and you as a business owner could be personally responsible for your LLC’s liabilities and debts. Therefore, it’s extremely important that you complete each step outlined in this guide to ensure an effective and compliant dissolution.
As for the question of when you should dissolve your LLC, you should do this as soon as you’re certain you will no longer conduct business through this entity. This gives you an opportunity to close up shop with the knowledge that you’re not transacting any business after you start the dissolution process.
Dissolution for Domestic Alabama LLCs
Is your LLC based in Alabama, and registered as a domestic entity in this state? If so, you’ll start your dissolution process with a document known as the Articles of Dissolution. This form will include some crucial information about your business, so you should fill it out carefully and accurately.
Among the info you’ll need to complete this form is the official business name of your LLC, your Alabama entity identification number, the date your LLC was formed in Alabama, the name and address of the individual filling out the dissolution form, the reason for dissolving your company, the effective date of your LLC dissolution, and your credit card information to process the filing fee.
After you’ve filled out the form, you will need to send it (along with two copies) to the Office of the Judge of Probate located in the same county you formed your business in. It’s important to note that the fees associated with this filing can vary by county, so be sure to check with your probate judge before filing to see how much you’ll owe.
Then, you have to provide the Office of the Judge of Probate with a check for $100 written out to the Secretary of State. It is then the responsibility of the probate judge to deliver a certified copy of your completed Articles of Dissolution, along with your $100 check, to the Secretary of State. Just to be clear, you have no direct responsibilities with the Secretary of State’s office during this process, as the Office of the Judge of Probate acts on your behalf.
Under normal circumstances, the Office of the Judge of Probate should be able to complete these steps within two weeks (or 10 business days), at which point your LLC will be officially dissolved.
But what does this process look like for a business that was formed outside the state and then expanded to Alabama?
Dissolution for Foreign LLCs in Alabama
If you operate a foreign LLC in the state of Alabama, the dissolution process looks quite different than it does for domestic entities. In fact, it’s actually technically called a withdrawal rather than a dissolution. Interestingly, this process has nothing to do with the Office of the Judge of Probate. Instead, you’ll deal directly with the Secretary of State, cutting out your local county’s middleman.
To dissolve a foreign LLC in this state, you’ll first complete the Foreign Corporation Certificate of Withdrawal document. Much of the information for this form is the same as the info provided for the Articles of Dissolution, but there are some differences for the foreign version.
This form requires your Alabama entity ID number, the name and address of your business, the jurisdiction you originally formed your domestic LLC in, the LLC’s original Certificate of Compliance from the Alabama Department of Revenue, and the Secretary of State Payment Option Sheet including payment for $100. You can either attach a paper check to the form or provide the Secretary of State with your credit card information.
If you’re in a hurry to withdraw your foreign LLC, you can pay the Secretary of State an extra $100 and they’ll process your withdrawal within 24 hours of receiving your payment and completed documents.
Involuntary Dissolutions in Alabama
We should also discuss the potential for an LLC to be involuntarily dissolved by the state. There are several reasons this could happen, and most of them revolve around significant mistakes made by the LLC’s ownership group.
For instance, Alabama could involuntarily dissolve your LLC if you fraudulently formed it in the first place, do not appoint a registered agent (or if you let your registered agent lapse), fail to file the proper forms for changing your registered agent, or otherwise abuse the privilege to operate a business in Alabama.
It’s obviously never advisable to operate your LLC in a way that leads to the state dissolving it against your will. However, the penalties can be even steeper than you might realize. For example, your LLC will never be allowed to operate in Alabama again if it is involuntarily dissolved. Instead, you would need to start the LLC formation process over again from the start.
In addition, if you keep operating your business after the state involuntarily dissolves it, you could open yourself up to all sorts of legal issues due to the continued operation of a non-compliant entity. In general, you should be as careful as possible when it comes to following the rules and regulations in this state.
It’s not that the process for dissolving or withdrawing your LLC in Alabama is terribly difficult. However, it is a process that you need to take great care to complete in a compliant fashion, or you could expose your business to a wide variety of potential legal complications and financial penalties. Trust us when we say it’s much smarter and easier to simply follow the directions with care to avoid any issues.
Do you need more information about operating an LLC in Alabama? Take a look at the following resources: