A 2021 study revealed that the United States is among the most entrepreneurial countries worldwide. With such a talented workforce and plenty of resources, it’s unsurprising that there are 72,560 startups in the country.
However, experts believe that 90% of those startups will fail within their first two years due to lack of funding or misreading market demands. Whatever their reason, failure is simply one of the most common risks of starting a business.
When ventures go out of business, their owners have no choice but to discontinue. If your Nevada LLC is no longer economically viable, now’s the right time to start working on its proper dissolution.
This blog will help you figure out how to terminate an LLC correctly.
Dissolution vs Termination of An LLC
Before we jump into how to end your LLC, let’s talk about the difference between terminating and dissolving a business.
Most people use the terms “termination” and “dissolve” interchangeably, even if these words have different meanings. The word dissolution refers to the process itself, while termination means the discontinuation of operations.
Lawyers typically use the term dissolve when one of the business owners dies or wants to leave the business. Suppose two partners open an LLC in Nevada, and one decides to leave. In that case, the other partner needs to dissolve their partnership before they can leave the company.
Once they’re done with the dissolving process, they can say they’ve terminated their partnership. Think of it this way: you can only say that your LLC is terminated once you have filed all the paperwork you must submit.
While all LLCs dissolve for various reasons, they typically fall into two categories: voluntary and involuntary.
Voluntary Dissolution of LLC
Voluntary dissolution is when the LLC owners collectively decide to discontinue operations. First, they need to find a dissolution trigger. These triggers are typically included in an LLC’s operating agreement.
Once they agree on a trigger, they can start casting their votes on whether or not they want to end their business.
Involuntary Dissolution of LLC
Also known as judicial dissolution of LLCs, the Secretary of State typically imposes involuntary dissolution if a startup fails to pay its taxes or comply with state laws.
It’s also worth noting that judicial dissolution can also happen when LLC members want to cut their business ties with one another. Suppose two members decided to sue one another for disputes. In that case, they can ask the court to dissolve their LLCs as part of their lawsuit.
The process for LLC dissolution stays the same regardless of whether your reasons are voluntary or involuntary.
How to Dissolve a Nevada LLC
Since the law considers LLCs separate legal entities, they can still exist without owners. You need to follow Nevada’s dissolution process for LLCs if you want your operations to end.
Meet with Members And Conduct A Vote
Start by calling a meeting with your co-owners. Within that conference, you must vote on your LLC’s termination and create a new resolution.
Nevada’s Limited Liability Company Act requires an LLC to pay all debts and distribute all remaining assets to the members before a company officially dissolves. So, before you can go your separate ways, you need to pay all of your startup’s debts and share its assets with your members according to their interests.
Obtain Dissolution Paperwork
Once the debts have been paid and the assets have been shared, you can start working on the dissolution forms. You can find the form in the business section of the Secretary of State’s website. Down the document and fill it out.
You need to ensure that you or another member signs the document stating all of your LLC’s debts have been paid and its assets have been shared. You also need to state that there are no pending lawsuits against your company before you can file it.
File the Articles of Dissolution
After filling out the articles of dissolution, you can now file them via mail or in person. Nevada requires LLCs to pay a $100 filing fee for Articles of Dissolution.
The termination will take effect the same day that Nevada accepts your documents unless you’ve requested a later date. In that case, it’ll only be effective on the requested date.
If you want to discontinue operations later, they should fall within 90 days. They must be included in your Articles of Dissolution. The state will only accept your request if it is included in your submission.
Closing Your Doors
Dissolving an LLC with the state is only the first step in closing down a business. You must still notify your clients, close accounts and file your final tax returns. If the process looks like too much work, NCH will do the heavy lifting for you.
One of our business experts or consultants at NCH, Inc. can provide you with the appropriate reference material for further information.