Many reasons can lead to the closure of a business. Sometimes, a business owner encounters financial difficulties. Some simply want to retire from doing business. It may also be because the company has fulfilled its purpose, and there is no reason to keep it going. No matter what your reason is, one thing is for sure. You will have to go through the right process to prevent any legal issues in the future. Many business owners choose to form a limited liability company (LLC) because of the personal liability protection and taxation flexibility that it offers. When you started your LLC in Hawaii, you had undergone the business formation process and submitted formal paperwork. Thus, you also need to go through a process when you want to dissolve a Hawaii LLC.
What To Avoid
Before submitting your business dissolution documents, you have to make sure that you are doing the right thing. Here are some mistakes that you need to avoid:
- Do not be too emotionally attached to the business. Your company is the result of your hard work and effort. You went through a lot to raise it from the ground up. That is why it is only natural for you to have an emotional bond with the company. However, you should not let that cloud your judgment. Make sure that you remain rational when it comes to business decisions. You have to admit when it is time to let go.
- Do not make the mistake of being unprepared for life after the closure. Closing a business can be a hard experience. However, you can take it as an opportunity to start over. Make sure you have a backup plan. What will you do after closing the business? Are you ready to pursue your next business venture? The key is for you to plan and consider the various possibilities that you can enjoy.
- Do not forget to clean up any loose ends. Failure to take care of your obligations may lead to lawsuits and other legal issues.
- Do not let the whole ordeal overwhelm you. Dissolving a Hawaii LLC takes more than filing a few pieces of paperwork. You will have to make sure that there will be no possible legal problems. In some cases, the idea of going through multiple steps can overwhelm a person. You can prevent this by having a solid plan and taking on each step one at a time. Getting assistance from a team of experts like DoMyLLC can also help you overcome the challenges.
Things To Do
While there are things you should avoid when you dissolve an LLC, there are also those that you have to do. Here are some of the things you need to complete:
- Follow the articles stated in your organizational documents. Check the operating agreement of your LLC for provisions regarding dissolution. Follow all the procedures stated in there, which may include the setting of a business meeting and voting requirement. In most cases, you will either need two-thirds or a majority vote to dissolve your business. Unlike other states, the LLC Act of Hawaii does not state any alternative method for voluntary dissolution.
- File the dissolution with the state. After voting for the closure of your company, you will have to file formal paperwork with the Business Registration Division of the Department of Commerce and Consumer Affairs. Use Form LLC-11 Articles of Termination. You can submit by mail, fax, or in-person. The filing comes with a $25 fee.
- Notify the Internal Revenue Service (IRS) and other tax agencies. Hawaii LLCs are liable for taxes. Even if you end your business, you will still have to report taxes for the prior and current years. It means that you will have to continue filing your quarterly and annual taxes, as well as any capital gains and liquidation forms. You should also file final tax forms for income, sales, and payroll taxes. Make sure you inform the agencies that it will be your final tax report by indicating it in the appropriate form.
- Cancel all business licenses. Depending on your activities and industry, you may have acquired certain business licenses and permits. Make sure you terminate all of these. Not only will this inform the agencies that you are no longer in business, but it will also prevent other entities from illegally using your business account and name.
- Notify your creditors. Your LLC should inform all known creditors of the impending closure. Notify all lenders, insurers, suppliers, service providers, and vendors that you will be dissolving your business and will no longer be using their services.
You may send a written notice to known claimants after dissolution. State law requires you to include the following information:
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- What to include in their claim
- Where they can send the claim
- Deadline for the claim, which is not less than 120 days after the receipt of the notice
- A statement that you will no longer receive claims after the deadline
You can also give notice of the intent to terminate the business to unknown claimants through a newspaper publication at least four times. In this case, claimants will have two years after the last publication to bring a claim.
- Settle all creditor claims. Inspect the claims and determine whether you have to accept or reject them. Make sure you settle all valid claims.
- Collect all money others owed to your LLC. Try to collect all debts that others owe your business as soon as possible. You do not have to inform them about the closure.
- Inform stakeholders about the dissolution. Aside from creditors, you also have to let all involved parties know about the closure. These include your landlord and employees.
- Sell and distribute the remaining assets. If your company has any business assets left after settling all claims, you will have to distribute them according to an ownership interest.
Need Help To Dissolve An LLC?
Business closure requires courage. You will have to go through multiple steps and ensure compliance to prevent any legal issues. If you need help to dissolve an LLC in Hawaii, it may be best to consult a reliable third-party organization like DoMyLLC. Our team can handle the paperwork and state process while you focus on other matters.