Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Texas are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Texas has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Texas LLC dissolution process? Are there different processes for businesses based in Texas 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 Texas LLC?
When closing a business registered as an LLC in the state of Texas, 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 Texas 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 Texas 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 Texas LLCs
Is your LLC based in Texas, 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 Termination of a Domestic Entity. 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 type of entity you operate, the date your LLC was originally registered in Texas, the LLC’s Texas entity file number, the names and addresses of the LLC’s managers and/or members, the reason for dissolving your LLC, the effective date of your dissolution, a tax clearance from the Texas state comptroller (which you can request on this site), the date, your printed name, and your signature.
Once you’ve finished filling out this form, you will submit it in duplicate to the Secretary of State, along with your $40 filing fee. (If you choose to pay by credit card, you will pay an additional $1.08 in convenience fees.) You can file this form by mail, fax, in person, or online. Texas typically processes these filings within 5-7 business days. If you’re in a hurry, you can expedite your filing for $25, which speeds up your turnaround time to just one business day.
But what does this process look like for a business that was formed outside the state and then expanded to Texas?
Dissolution for Foreign LLCs in Texas
If you operate a foreign LLC in the state of Texas, 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 Certificate of Withdrawal of Registration document. Much of the information for this form is the same as the info provided for the Certificate of Termination, but there are some differences for the foreign version.
This form requires your LLC’s official business name, your company’s entity type, the jurisdiction where your LLC was originally formed, the date you registered your LLC, your LLC’s Texas entity file number, the address of your registered agent/office, an address for potential future service of process deliveries, the effective date of your withdrawal, an attached tax certificate (request one here), your signature, printed name, and the date.
Once you’ve filled out the form, you can submit it by mail, fax, in person, or online. Texas typically processes these filings within 5-7 business days. If you’re in a hurry, you can expedite your filing for $25, which speeds up your turnaround time to just one business day. As for the filing fee, the Certificate of Withdrawal costs $15 to file, unless you use a credit card, in which case you can add an extra 41 cents.
Involuntary Dissolutions in Texas
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, Texas could involuntarily dissolve your LLC if you fail to file any relevant reports required by the state within 90 days of their due dates, fail to maintain a registered agent for your LLC, fail to pay your state taxes, or fail to pay any fees, fines, or penalties assessed by the state within 15 days.
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 correct the issues that led to your involuntary termination, acquire a tax clearance from the Comptroller, file a Certificate of Reinstatement, pay any applicable late fees or penalties associated with missed filings, and pay the $75 reinstatement fee.
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 Texas 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 Texas? Take a look at the following resources: