Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Maryland are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Maryland has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Maryland LLC dissolution process? Are there different processes for businesses based in Maryland 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 Maryland LLC?
When closing a business registered as an LLC in the state of Maryland, 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 Maryland 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 Maryland 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 Maryland LLCs
Is your LLC based in Maryland, 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 Cancellation. 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, the address of your LLC’s location in Maryland, the name and address of your resident agent (in most states, this is referred to as a registered agent), the name and address of each LLC member who was designated to help wind up business affairs, a designation that your LLC either has no known creditors or that your creditors have been provided with a Notice of Termination, the names and signatures of your authorized person(s), the signature of your resident agent, and a return address.
Once you’ve finished filling out the form (or creating your own Articles of Cancellation from scratch), you’ll need to submit this document by mail, in person, or online to the Department of Assessments and Taxation. There is a $100 filing fee for this document.
If you file online, they will process your Articles of Cancellation within seven business days, while mailed filings take roughly four weeks (although the state does note that it can sometimes take up to six weeks during busy periods). If you hand-deliver your documents, they will process them the same day if you file them before 4:00 pm.
Expedited options are also available. For mailed filings, a $50 expediting fee can speed up your turnaround times to 10 business days. In addition, for a $425 fee, they will process your walk-in filing within just two hours.
But what does this process look like for a business that was formed outside the state and then expanded to Maryland?
Dissolution for Foreign LLCs in Maryland
If you operate a foreign LLC in the state of Maryland, the dissolution process looks quite different than it does for domestic entities. In fact, it’s actually technically called a cancellation rather than a dissolution.
To dissolve a foreign LLC in this state, you’ll first complete the Certificate of Cancellation of a Foreign Limited Liability Company Registration document, which can also be filed online. This is an extremely simple form that only requires you to list your LLC’s name, the state it was originally registered in, and the signature of your LLC’s authorized person.
The Certificate of Cancellation has the same $100 filing fee that the domestic version has, and the expediting and filing options are all identical as well.
Involuntary Dissolutions in Maryland
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. In Maryland, involuntary dissolutions are referred to as forfeitures, and they typically happen after your business has been “not in good standing” for an extended period of time.
For instance, Maryland could involuntarily dissolve your LLC if you fail to file your annual reports, fail to pay any relevant monetary penalties, don’t have an active registered agent, or have unresolved issues with the Office of the Comptroller or the Department of Labor.
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, you would need to file the Articles or Certificate of Reinstatement, along with a $100 fee, and also catch up on your annual reports and any other fees or fines your LLC may be subject to.
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 Maryland 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 Maryland? Take a look at the following resources: