Dissolving a Limited Liability Company: Part I, How to Dissolve

If you no longer wish to carry on the business of your limited liability company, Article 9 of the Virginia Limited Liability Company Act explains how to dissolve your limited liability company. Dissolution is a procedure by which you can end the existence of your limited liability company and dispose of known claims against it.

Among others, the Virginia Limited Liability Company act permits you to dissolve your limited liability company based upon your limited liability company’s formation documents such as the limited liability company’s articles of organization or operating agreement. A limited liability company’s articles of organization or operating agreement will commonly set forth procedures for dissolving a limited liability company. If your limited liability company’s articles of organization contain such procedures, the Virginia Limited Liability Company Act permits the LLC to follow such procedures. The procedures often set forth in a limited liability company’s formation documents include advance notice to members, a description of the voting process, and the percentage of the vote required to dissolve the limited liability company.

If your limited liability company does not have articles of organization or an operating agreement, you may still dissolve your limited liability company “upon the unanimous written consent of the members” or by petitioning the court for the entry of a decree of judicial dissolution.

After dissolving your limited liability company, the company continues to exist while you “wind up” the affairs of the company. The Virginia Limited Liability Company act permits the members of a limited liability company to wind up its affair unless the company’s formation documents provide otherwise. Winding up the affairs of your limited liability company is complete when (i) “all debts, liabilities, and obligations of the limited liability company have been paid and discharge or reasonably adequate provision therefor has been made” and (ii) all of the limited liability company’s remaining property and assets have been distributed to the limited liability company’s members.

The Virginia Limited Liability Company Act requires the distribution of your company’s assets in the following order. First, your company’s assets must be distributed to creditors, including members of the limited liability company. Second, unless your limited liability company’s formation documents provide otherwise, your company’s assets are distributed to members and former members in satisfaction of liabilities for distributions. Third, unless your limited liability company’s formation documents provide otherwise, your company’s assets are distributed “to members first for the return of their contributions and second with respect to their interests in the limited liability company, in the proportions in which the members share in distributions.”

After the affairs of your limited liability company have been wound up, you must file an articles of cancellation. The Virginia Limited Liability Company Act requires the articles of cancellation to include (i) the name of your limited liability company; (ii) your limited liability company’s identification number; (iii) the effective date of your limited liability company’s certificate of organization; (iv) a statement that your limited liability company has completed winding up its affairs; and (v) other information that the members of your limited liability determine should be included, including the reason for filing the article of cancellation.

In Part II of this posting, we will address what happens to claims against the limited liability company during and after dissolution.

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