Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Massachusetts are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Massachusetts has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Massachusetts LLC dissolution process? Are there different processes for businesses based in Massachusetts 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 Massachusetts LLC?
When closing a business registered as an LLC in the state of Massachusetts, 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 Massachusetts 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 Massachusetts 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 Massachusetts LLCs
Is your LLC based in Massachusetts, and registered as a domestic entity in this state? If so, you’ll start your dissolution process with a document known as the Certificate of Cancellation. You can draft your own Certificate of Cancellation, or you can fill out the state’s template online. 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 federal tax ID number or EIN (Employer Identification Number), the date your original Certificate of Organization was filed, the reason for dissolving your LLC, the effective date of your cancellation, and any other information you deem to be important.
Once you’ve finished preparing your Certificate of Cancellation or filling out the online form, you can submit it to the Secretary of the Commonwealth along with your $100 filing fee. This state accepts Certificates of Cancellation via mail, fax, in person, or online. If you file by fax or online, you will need to include an additional $10 expediting fee.
Filings submitted online or by fax typically take less than 48 hours to process, and that same general timeframe applies to in-person filings as well. If you choose to mail your Certificate of Cancellation, you can expect the state to process it within 3-5 business days.
But what does this process look like for a business that was formed outside the state and then expanded to Massachusetts?
Dissolution for Foreign LLCs in Massachusetts
If you operate a foreign LLC in the state of Massachusetts, the dissolution process looks slightly different than it does for domestic entities. In fact, it’s actually technically called a withdrawal rather than a dissolution.
To dissolve a foreign LLC in this state, you’ll first complete the Certificate of Withdrawal document. Much of the information for this form is the same as the info provided for the Certificate of Cancellation, but there are some differences for the foreign version.
This form requires your LLC’s federal tax ID number (EIN), the name your LLC uses to conduct business in Massachusetts, the business addresses of your LLC’s principal office in your domestic state and in Massachusetts (if applicable), the name and address of your resident agent, an affirmation that the LLC is no longer conducting business in Massachusetts, and a confirmation that all of the LLC’s tax obligations in Massachusetts have been fulfilled.
The filing fees and turnaround times for this filing are the same as those for the Certificate of Cancellation. There is a $100 filing fee for the Certificate of Withdrawal, and you’ll need to add $10 for faxed or online filings. Filings submitted online or by fax typically take less than 48 hours to process, and that same general timeframe applies to in-person filings as well. If you choose to mail your Certificate of Cancellation, you can expect the state to process it within 3-5 business days.
Involuntary Dissolutions in Massachusetts
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, Massachusetts could involuntarily dissolve your LLC if you fail to file your annual reports for a period of at least two years, or if the Secretary of the Commonwealth determines that your LLC is inactive and dissolving it is within the public interest. Once this decision has been made, you have 90 days to respond and fix the problems. If you don’t, your LLC will be administratively dissolved.
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 in this state are less severe compared to many other states. If your Massachusetts LLC is administratively dissolved, all you need to do to get it back in good standing is file the Limited Liability Company Application for Reinstatement Following Administrative Dissolution form, along with its $100 filing fee. You would also need to catch up on any delinquent annual reports.
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 Massachusetts 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 Massachusetts? Take a look at the following resources: