How to Dissolve an LLC in Texas
July 26, 2013 | By Vela Wood
There are a lot of reasons why members of a Limited Liability Company decide they no longer want the company to exist. But whatever the reason, simply making the decision to stop company operations does not make the LLC magically disappear.
If only it were that easy.
Unfortunately it isn’t, but this blog should make it easier to understand exactly what steps members must take to ensure the Ghost-of-LLC-Past does not drop in for an unexpected visit in the future.
Some might consider it a hassle, but making sure the LLC is properly dissolved is actually really important; failing to terminate the entity could subject the company to additional liability and additional franchise taxes—and no one wants that. (Or at least not anyone I’ve come across).
So how do you successfully terminate a Texas LLC?
At the risk of sounding like a self-help book, below are the five easy* steps members should take to dissolve an LLC in Texas.
*(or not so easy—when filing paperwork with the government there is always the possibility of long turnaround times and/or the occasional paper cut).
Five Steps to Dissolve a TX LLC [further explanation below]:
1. Event requiring winding up.
2. Wind up the LLC’s affairs.
3. Request & Obtain a Certificate of Account Status from the Texas Comptroller of Public Accounts.
4. Submit two (2) signed copies of the Certificate of Termination form to the Texas Secretary of State (with Certificate of Account Status attached).
5. Pay fee.
Event requiring winding up: This just means an event has occurred that makes it necessary to cease doing business and dissolve the LLC. Typically, this event is a voluntary decision of the members (keep in mind: the decision must be in compliance with Texas law and the Company Agreement and Certificate of Formation, which may state specifically how the members may voluntarily end the LLC). Other events requiring winding up include: (1) the expiration of the term of duration stated in the certificate of formation; (2) the occurrence of some event stated in the LLC’s governing documents that requires winding up; (3) the occurrence of some event that requires winding up as a matter of Texas law; and (4) a court order stating the LLC must be terminated.
Winding up the LLC’s affairs: This means stopping all operations except any that are directly related to winding up the LLC. (like paying off creditors, settling legal claims, liquidating assets, or collecting money owed to the company—to name a few).
Requesting a Certificate of Account Status: The Certificate of Account Status is basically how the Texas Secretary of State’s office confirms an LLC is up to date on all of its taxes before it signs off on a dissolution. The document itself is issued by the Texas Comptroller.
To request the Certificate, fill out Form 05-359 available on the Comptroller’s website. Because, however, the Secretary of State will not accept a Certificate printed off of the Comptroller’s website, members have two options for obtaining an official form: 1) submit the form online; or 2) submit the form directly to a Comptroller Field Office.
Obviously, it seems much more convenient to submit the form online, so why would anyone ever trek down to a Field Office? Why did I even tell you about that option?
A. If you submit online, it will generally take 4-6 weeks to receive the Certificate.
B. If you submit at the Field Office, you can walk out the door with the Certificate in hand.
So, members can weigh the options and decide for themselves, but if time is of the essence (or you’re curious about what a Field Office looks like), here is the link to the list of Field Office locations: http://window.state.tx.us/taxinfo/fieldoff.html.
Certificate of Termination: After receiving a Certificate of Account Status from the Comptroller, the next step is filling out a Certificate of Termination request, which is available on the Secretary of State’s website. The form can be submitted online (after setting up an account), but note that if you decide to go old-school and submit it via mail or fax, you need to submit two copies of the form.
Now, simply attach the Certificate of Account Status to the Certificate of Termination and proceed to the next step.
Pay fee: The Secretary of State charges a $40* filing fee for dissolving an LLC. If submitting via the website, you can pay online when you submit the forms. Checks should be payable to the secretary of state, and if you’re paying by credit card via fax, make sure you also attach Form 807.
If you’re mailing, faxing, or physically delivering the Termination request, here is the address information:
Mail to: P.O. Box 13697, Austin, Texas 78711-3697
Faxed to: (512) 463-5709
Delivered to: James Earl Rudder Office Building
1019 Brazos, Austin, Texas 78701
*(credit card charges are subject to a 2.7 percent convenience fee).
Once the Secretary of State’s office receives your Certificate of Termination request (with the attached Certificate of Account status AND the fee), it will usually take a few days for them to respond (a little longer if submitting via mail or fax). If everything is in order, you should receive documents confirming the termination of the LLC. Make sure to keep a copy of these documents in your records.
And there it is: 5 steps to terminating an LLC. It may sound like a lot of work, but it’s worth the peace of mind that comes with knowing your LLC is a thing of the past.