Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Michigan are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Michigan has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Michigan LLC dissolution process? Are there different processes for businesses based in Michigan 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 Michigan LLC?
When closing a business registered as an LLC in the state of Michigan, 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 Michigan 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 Michigan 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 Michigan LLCs
Is your LLC based in Michigan, 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 Dissolution, which can be filed online or on a paper form. 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 identification number assigned to your business by the Corporations, Securities & Commercial Licensing Bureau, the reason for your LLC’s dissolution, and the effective date of your dissolution, along with your printed name, signature, phone number, and the date.
Once you’ve finished filling out this form, you need to submit it to the Corporations, Securities & Commercial Licensing Bureau, along with your $10 filing fee. The state says that these filings can take up to 10 days to process, but there are expedited services available. You can get 24-hour service for an additional $100 charge, same-day service for $200, two-hour service for $500, or one-hour service for $1,000.
Within 60 days of filing your Certificate of Dissolution, you will also need to request a tax clearance from the state Department of Treasury’s Tax Clearance Section. The form required for this clearance is the Request for Tax Clearance Application. The Department of Treasury can take up to 60 days to reply to your request, but this has no effect on the effective date of your dissolution.
But what does this process look like for a business that was formed outside the state and then expanded to Michigan?
Dissolution for Foreign LLCs in Michigan
If you operate a foreign LLC in the state of Michigan, 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.
To dissolve a foreign LLC in this state, you’ll first complete the Application for Certificate of Withdrawal document, which can be filed online or using a paper form. Much of the information for this form is the same as the info provided for the Certificate of Dissolution, but there are some differences for the foreign version.
This form requires your LLC’s name, the identification number provided to your business by the Corporations, Securities & Commercial Licensing Bureau, the jurisdiction where your LLC was originally formed, and contact information for potential future service of process deliveries, along with your name, signature, and the date.
The filing instructions, fees, and turnaround times for this document are exactly the same as they are for the Certificate of Dissolution. You need to submit it to the Corporations, Securities & Commercial Licensing Bureau, along with your $10 filing fee. The state says that these filings can take up to 10 days to process, but there are expedited services available. You can get 24-hour service for an additional $100 charge, same-day service for $200, two-hour service for $500, or one-hour service for $1,000.
Within 60 days of filing your Application for Certificate of Withdrawal, you will also need to request a tax clearance from the state Department of Treasury’s Tax Clearance Section. The form required for this clearance is the Request for Tax Clearance Application. The Department of Treasury can take up to 60 days to reply to your request, but this has no effect on the effective date of your withdrawal.
Involuntary Dissolutions in Michigan
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, Michigan could involuntarily dissolve your LLC if you fraudulently formed your business in the first place, repeatedly and willfully conduct business in an illegal manner, or repeatedly and willfully exceed the authority granted to your LLC. In an interesting note, corporations can also be involuntarily dissolved if they fail to file their annual reports, but this is not true for LLCs.
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 Michigan aren’t terribly punitive. If your LLC is administratively dissolved, all you need to do is file the Certificate of Restoration of Good Standing, along with a $50 filing fee. You will also need to catch up on any overdue annual reports.
Still, 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 Michigan 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 Michigan? Take a look at the following resources: