Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Pennsylvania are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Pennsylvania has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Pennsylvania LLC dissolution process? Are there different processes for businesses based in Pennsylvania 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 Pennsylvania LLC?
When closing a business registered as an LLC in the state of Pennsylvania, 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 Pennsylvania 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 Pennsylvania 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 Pennsylvania LLCs
Is your LLC based in Pennsylvania, and registered as a domestic entity in this state? If so, there are actually a few different ways this can be done, depending on the status of your LLC. If you want to dissolve your LLC but still be able to wind up the company’s affairs, you’ll start your dissolution process with a document known as the Certificate 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, the name and location of your LLC’s registered agent, the name, signature, and title of your LLC’s representative, and the date.
You can also file the Certificate of Termination. The big difference between the Certificate of Termination and the Certificate of Dissolution is that the Certificate of Termination will result in your LLC being removed from the rolls of active businesses from the state’s records, and the existence of your LLC will cease the moment this filing is accepted, which means you can’t even wind up your affairs if you haven’t already done so.
This form requires your LLC’s name, the name and address of your registered agent, an indication that your business either has no liabilities or that adequate provisions have been made for your liabilities, an indication that there are no actions pending against your LLC in a court (or that adequate provisions have been made), the date, and the name, signature, and title of your LLC’s representative.
If your LLC has never transacted any business in the state of Pennsylvania, you will instead fill out the state’s Voluntary Termination form. This form requires your LLC’s name, your registered agent’s name and address, an indication that your business either has no liabilities or that adequate provisions have been made for your liabilities, the date, and the signatures your LLC’s organizers.
No matter which of these three forms you choose to file, you will also need to acquire a tax clearance certificate from the Department of Revenue. Without it, you will not be allowed to dissolve your LLC. Once you have this form, you can attach it to your chosen dissolution document and submit it by mail, in person, or online, and there’s a $70 fee. The Pennsylvania Department of State says that you can expect your filing to take 7-10 business days to process. If you’re in a hurry, you can expedite your order in person — this state does not accept expedite requests any other way. For $100, you can get same-day service, while three-hour service costs $300 and one-hour service costs $1,000.
But what does this process look like for a business that was formed outside the state and then expanded to Pennsylvania?
Dissolution for Foreign LLCs in Pennsylvania
If you operate a foreign LLC in the state of Pennsylvania, 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 Statement of Withdrawal of Foreign Registration 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 LLC’s official business name, the jurisdiction where your LLC was originally registered, the name and address of your registered agent, the reason for your withdrawal, the date, and the signature and title of your LLC’s representative.
Just like with the domestic version, dissolving a foreign LLC in this state requires a tax clearance before filing. Once you’re ready to file, you can submit your documents by mail, in person, or online, and there’s a $70 fee. The processing speeds for the Statement of Withdrawal are the same as for the domestic dissolution forms (7-10 days, unless you expedite your order in person).
Involuntary Dissolutions in Pennsylvania
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, Pennsylvania could involuntarily dissolve your LLC if the business has no members for 180 consecutive days, “all or substantially all” of the LLC’s activities are unlawful, it is not reasonably practicable for the LLC to continue operations in according with its operating agreement or Certificate of Organization, the business is operated in a fraudulent manner, you fail to file your LLC’s decennial report, or you fail to pay any fees assessed to your business.
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 Pennsylvania 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 Pennsylvania 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 Pennsylvania? Take a look at the following resources: