When to dissolve an LLC, or let it lapse

Published by Vermilion Vitez Holding LLC, which sells LLC formation and resells registered-agent service fulfilled by Registered Agents Inc.

The steps, in order

1. Dissolved, lapsed, or inactive: three different records

   Florida lists five events that dissolve a limited liability company and require it to wind up its activities and affairs (Fla. Stat. 605.0701). They are an event the operating agreement says causes dissolution, the consent of all the members, 90 consecutive days with no members (with an exception for admitting a new member), a court decree of judicial dissolution, and the filing of a statement of administrative dissolution by the Department of State.

   Stopping business is not on that list. A company that has gone quiet but has none of the five events behind it has not been dissolved on the record. It is inactive, and the annual report rule that applies to every Florida LLC still applies to it.

2. What happens if you just stop

   Sunbiz says an LLC annual report filed after May 1 draws a $400 late fee, and that a company that does not file by the third Friday of September "will be administratively dissolved or revoked in our records at the close of business on the fourth Friday of September." The statute sets the same fourth Friday (Fla. Stat. 605.0714(2)). The Department of State fee schedule lists the LLC annual report at $138.75, or $538.75 when received after May 1.

   An administratively dissolved Florida LLC "continues in existence but may only carry on activities necessary to wind up its activities and affairs, liquidate and distribute its assets, and notify claimants" under the sections on claims. The dissolution does not end its registered agent's authority to receive service of process (Fla. Stat. 605.0714(5) and (6)).

   The company can apply for reinstatement at any time after the dissolution date. Sunbiz says reinstatement means an application plus all associated fees, the reinstatement fee and the annual report fees due, and the fee schedule lists the LLC reinstatement fee at $100.00 plus each year's annual report fee. The dissolved company's name is not available to another business entity for 1 year after the dissolution date unless the company gives the Department a record permitting it (Fla. Stat. 605.0715(5)).

3. Delaware and Texas treat a company that stops paying differently

   A Delaware LLC owes an annual tax of $400, due June 1 after the calendar year closes. If it is not paid by June 1 the company owes an added $200, and the unpaid tax bears interest at 1.5% for each month or part of a month (6 Del. C. 18-1107(b), (c) and (e)). The certificate of formation is canceled if the tax goes unpaid for 3 years from its due date (6 Del. C. 18-1108(a)). Delaware's Division of Corporations page still lists the LLC annual tax as $300.00; the statute says $400, and this guide follows the statute.

   Texas does not wait for an owner to act. The Secretary of State says that when an entity fails to file a franchise tax report or pay franchise taxes, it is forfeited under the Tax Code. A forfeited entity can reinstate at any time by filing the reports, paying the taxes, penalties and interest, and applying with a tax clearance letter (Form 05-377) from the Comptroller.

4. The member vote or written consent

   In Florida, the consent of all the members is one of the five events (Fla. Stat. 605.0701(2)). The operating agreement can name a different event that causes dissolution (605.0701(1)), so the first document to read is the operating agreement. The statute section read for this guide does not prescribe a form for the members' consent or a name for it.

   A court can also dissolve an LLC. Fla. Stat. 605.0702 lets a manager or member petition when, among other grounds, the managers or members are deadlocked in management, the members cannot break the deadlock, and irreparable injury to the company is threatened or being suffered.

5. The IRS side follows the year the business closes

   The IRS page on closing a business says: "You must file a final return for the year you close your business." The return depends on how the LLC is taxed: Schedule C for a sole proprietor, Form 1065 for a partnership, and for a corporation (which includes S corporations) a final return with the "final return" box checked, plus Form 966 if the corporation adopts a resolution or plan to dissolve. Form 966 is a corporation form; the page lists it only under the corporation requirements.

   Closing the IRS account is a separate letter. To cancel an EIN, the business sends the IRS its legal name, EIN, address and the reason for closing, with a copy of the EIN assignment notice if it kept one. The IRS says it cannot close the account until all necessary returns are filed and all taxes owed are paid. The same page reminds owners to check their state responsibilities.

6. Foreign-registered LLCs: withdraw in the other state

   An LLC formed in one state and registered in another has two kinds of filing. Florida's Division of Corporations lists "File LLC Dissolution" and "File Foreign Entity Withdrawal" as separate filings, and the withdrawal fee for a foreign LLC is $25.00. Texas uses Form 608, a Certificate of Withdrawal of Registration, in which the foreign entity states it no longer is transacting business in Texas and is surrendering its authority to do so.

   Form 608 revokes the authority of the entity's Texas registered agent, consents to service of process on the Secretary of State, states that money due to the state has been paid or provided for, and requires a certificate from the Comptroller that all Title 2 Tax Code taxes have been paid (a foreign nonprofit corporation is excused from the certificate). Withdrawing in one state is a filing in that state; the sources read do not treat it as dissolving the company where it was formed.

7. If it already lapsed

   Reinstatement in Florida relates back to the date of the administrative dissolution, and the company may resume its activities and affairs as if the dissolution had not occurred (Fla. Stat. 605.0715(4)). Texas has no deadline to reinstate a forfeited entity, and since September 1, 2023 the three-year deadline to reinstate a voluntarily terminated Texas entity is gone. A Delaware LLC whose certificate was canceled for unpaid tax may be revived by filing a certificate of revival (6 Del. C. 18-1109).

   The Desk's state guides cover each path: the Florida, Delaware and Texas reinstatement guides, and the guide on how to close an LLC once the company is in good standing.

8. Filing help

   Vermilion Vitez sells dissolution and reinstatement filings.