Shutting down a Kentucky LLC is more than just closing a store or ending the business operations. There is a certain process that needs to be completed in order to dissolve an LLC.
Dissolve An LLC In Kentucky
When a company decides to form an LLC, it has to register with the state. So when that company needs to dissolve the business it is necessary to end the existence of the business officially by filing the correct paperwork with the state. Doing this will not only inform the state about it and remove its status as a state-registered business entity but also help put the company beyond the reach of creditors.
Reasons For Dissolution
Various reasons could lead to the voluntary dissolution of a Kentucky LLC. Here are some of them:
- The company reached a defined date of dissolution. In most cases, LLCs have perpetual existence. However, there are those that choose to set a defined date when the LLC will dissolve. This is stated in the formation documents of the company. It means the business has already served its purpose.
- It is required by the LLC’s operating agreement. The company’s operating agreement may define certain events that could lead to dissolution. For example, it could be due to the death or resignation of a certain member. In some cases, the dissolution will be triggered upon the sale of all of the company’s assets.
- The LLC members voted for the dissolution. An LLC can be closed upon the consent of all members or a certain percentage outlined in the company’s operating agreement.
- The LLC has no more members. Generally, an LLC will need to have at least one member. So if an LLC does not have a member or its operating agreement does not have a provision for the admission of a successor member, then the company may need to dissolve.
- The company no longer earns profits. Many owners of LLCs that go bankrupt end up dissolving their business. The same can be said if the company does not have sufficient cash flow.
How To Dissolve An LLC In Kentucky
The process of dissolution depends on state laws, so the requirements and fees will vary. In Kentucky, it involves the completion of the following steps:
Step 1: Check the operating agreement of the company.
The first thing an LLC has to do is to see if there are any provisions in its operating agreement regarding the company’s dissolution. Among the common steps outlined in this internal document are the following:
-
- Hold a vote with the LLC members for the dissolution.
- Record the votes in the minutes of the meeting.
- Determine the date of dissolution.
- Notify the creditors and settle any debts.
- Distribute the assets of the LLC.
The percentage of votes required is also usually outlined in the operating agreement. In case the LLC’s operating agreement does not mention anything about the dissolution process, the company will have to consult the state and check state laws.
Step 2: Close the LLC’s business tax accounts.
Active LLCs in Kentucky have various tax obligations and accounts. Those are maintained by different state departments. Check with the Department of Revenue, Department of Unemployment Insurance, and the office of the county clerk.
Before filing the dissolution paperwork, an LLC should pay off all its taxes and settle the fines it owes. Here are some of the most common taxes for Kentucky LLCs:
-
- Sales and Use Tax
- Unemployment Insurance Tax
- Employee Withholding Tax
The LLC will also have to inform the federal government about its closure. This can be done by checking the Final Return section on the Internal Revenue Service (IRS) tax forms. Doing this is enough to inform the IRS that the LLC will cease to exist and will no longer be operating.
Step 3: File formal paperwork.
The formal dissolution of an LLC in Kentucky will only be finalized once it has successfully filed the Articles of Dissolution with the Division of Corporations of the Secretary of State. This comes with a $40 filing fee. The state normally takes around 1 to 3 business days to finish processing the documents.
Mailed documents should be sent to:
Office of the Secretary of State
P.O. Box 718
Frankfort, Kentucky 40602-0718
For in-person filings, proceed to the following address:
Room 154, Capitol Building
700 Capital Avenue
Frankfort, Kentucky 40601
502-564-3490
The state has a readily available form you can use. But a company can draft its own Articles of Dissolution if the form does not meet the needs of the LLC.
To fill out the Articles of Dissolution, an LLC will have to disclose certain information about the company. That includes the following:
-
- LLC name
- The reason for the dissolution
- The date the dissolution will take effect
- Additional information if there is any
- Name, title, and signature of an authorized representative.
The Secretary of State accepts payments in cash, debit, or credit. For checks, they should be made payable to the Kentucky State Treasurer.
Step 4: Complete the winding-up process.
An LLC may continue to exist even after the members decide to dissolve it to finish the winding up of the company. The LLC can appoint a member, manager, or a team to handle all the tasks.
This phase allows the company to conduct actions related to the collection of assets, provision for the satisfaction of liabilities, and distribution of the assets necessary to satisfy obligations. A company can check the following list of appropriate actions:
-
- Collect the assets of the LLC.
- Dispose of assets not ultimately distributed in kind to LLC members.
- Discharge or create provisions for the discharge of the company’s liabilities.
- Distribute the remaining properties among members according to interests in the LLC.
Generally, the assets will be distributed during the winding up of the company. The priority is settling or making adequate provisions for settling the claims of creditors. That includes members who are creditors. After that, the remaining balance will be distributed in satisfaction of declared unpaid distributions. If the remaining balance is not completely used up, the assets will be given to the members in return for their contributions to the LLC. Lastly, any remaining balance will be distributed among the LLC members based on their respective sharing ratios.
The LLC Act of Kentucky has set guidelines on how to notify known and unknown creditors alike about the company’s dissolution. The LLC will have to inform known creditors of the deadline for filing claims. The notice should mention what information the claimant should include in the claim, the mailing address where they should send claims, and that the company will no longer accept claims after the deadline. It should also let the claimants know that they would have to bring an action to enforce claims within 90 days should the LLC reject a claim. Otherwise, the claim will be barred.
Companies should inform unknown creditors about the dissolution through a newspaper publication as well. The notice should include the above mentioned information. All unknown claimants should bring claims within two years of the dissolution.
Impact Of The Dissolution
After formal dissolution, the name of a Kentucky LLC will immediately be available for other entities to use. The company will lose its right to exclusively do business and to use the company name as soon as the state gives a proclamation of forfeiture.
Get Expert Help
An LLC that no longer wants to do business in Kentucky will have to go through the dissolution process. Not only will this remove the status of the company as a state-registered entity, but it will also help prevent any legal issues. That is why it is best to dissolve an LLC as soon as possible.
However, going through the whole ordeal can seem daunting. Some business owners may also find it hard to set aside time to handle the paperwork as they are busy settling the other affairs of the LLC. In such cases, the best way to deal with the requirements is to hire a reliable third-party organization like DoMyLLC.
Our team of experts can help streamline the process by handling the preparation and filing of formal paperwork for you. With our experience, we can ensure compliance with state requirements to avoid issues. Additionally, we offer personalized solutions to make sure that our services fit the needs of our clients. Contact us now to learn more.