Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Colorado are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Colorado has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Colorado LLC dissolution process? Are there different processes for businesses based in Colorado 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 a Colorado LLC?
When closing a business registered as an LLC in the state of Colorado, 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 Colorado 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 Colorado 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 Colorado LLCs
Is your LLC based in Colorado, and registered as a domestic entity in this state? If so, you’ll start your dissolution process with a document known as the Statement of Dissolution. This form will include some crucial information about your business, so you should fill it out carefully and accurately. In addition, it must be filed online on the Secretary of State’s website. You can find the form for your business by using the state’s record identification search.
Among the info you’ll need to complete this form is the official business name of your LLC, your Colorado ID number, and your jurisdiction. You’ll also provide the state with your principal office address, and the date your dissolution will take effect.
Once you’ve finished filling out the form — which is typically a simple process because the state preloads your business name, ID number, and jurisdiction in most cases — all you need to do is hit the “Submit” button and pay your $25 filing fee. Unlike in many other states, where you have to wait for days or even weeks to get your paperwork processed, Colorado processes online filings immediately.
But what does this process look like for a business that was formed outside the state and then expanded to Colorado?
Dissolution for Foreign LLCs in Colorado
If you operate a foreign LLC in the state of Colorado, the dissolution process looks quite different than it does for domestic entities. In fact, it’s actually technically called a relinquishment or withdrawal rather than a dissolution. The form you’ll fill out to relinquish your LLC’s right to conduct business in Colorado is the Statement of Foreign Entity Withdrawal. Like the Statement of Dissolution, you’ll fill out this form on the Secretary of State website.
This form requires some different information than the domestic version does, but like that document, this one also starts with your entity’s name and ID number. Then, you’ll need to indicate the name and address of your registered agent, the address of your principal office, the jurisdiction of your domestic formation, the date you want your dissolution to take effect, and the name and address of the individual filling out the form.
Unlike the Statement of Dissolution’s $25 fee, the Statement of Foreign Entity Withdrawal only has a $10 filing fee. Once you click the “Submit” button, your document will be filed with the state immediately.
Involuntary Dissolutions in Colorado
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, Colorado could involuntarily dissolve your LLC if you fraudulently formed it in the first place, if your LLC “exceeded or abused the authority conferred upon it by law,” if the business cannot reasonably continue operating according to its operating agreement, if the LLC fails to file its periodic reports, or if the LLC is insolvent and has outstanding debts.
It’s obviously never advisable to operate your LLC in a way that leads to the state dissolving it against your will. In Colorado, if your business is involuntarily dissolved, you have a 400-day period from the day it’s dissolved in order to return your LLC to active status. You will also need to pay a $100 fee to bring your LLC back from an involuntary dissolution, as well as paying any late fees that may apply.
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 Colorado 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 Colorado? Take a look at the following resources: