How to Dissolve a Business in Illinois | Essential Steps


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Dissolve Illinois LLC

Deciding to dissolve a Limited Liability Company can be difficult for business owners. Still, it is sometimes necessary due to changes in the business landscape, financial challenges, or personal reasons. Dissolving a business requires specific steps and regulations to complete the process correctly and legally. This comprehensive guide will teach you how to dissolve a business in Illinois.

Webinarcare Editorial Team will help you easily dissolve your business. You must be guided by all the factors gathered in this article.

If you are starting an LLC in Illinois, having an operating agreement is one of the key requirements in dissolving a business. Before starting the legal paperwork, there are a few things to remember. Initially, confirm that all LLC members agree with closing the business. Once everyone is ready, voting should be used to document everyone’s assent. They must vote in favor of the dissolution before the legal procedure may begin. The procedures for the dissolution are listed below.

How to Dissolve a Business in Illinois

Dissolving a business in Illinois requires following specific steps to ensure a smooth and legally compliant process. The process usually includes the following steps:

Step 1: Make the Decision

Before dissolving your business, ensure this decision is right for your Illinois business. Consider discussing the decision with your business partners, members, or legal counsel to weigh the pros and cons and determine if dissolving the business is best.

Step 2: Hold a Formal Vote

Once you’ve decided to dissolve your Illinois business, you’ll need to hold a formal vote among the members to approve the dissolution. This step is important because it ensures that all members know and agree to the decision to dissolve the business.

To hold a formal vote:

  • Review your Illinois Operating Agreement to determine the required voting procedures, such as the percentage of affirmative votes needed for approval.
  • Notify all Illinois members of the upcoming vote and give them sufficient time to review the matter and make an informed decision.
  • Conduct the vote according to the procedures outlined in your operating agreement.
  • Record the vote results in your business meeting minutes or a written resolution.

If most members approve the dissolution, you can proceed with the dissolution process.

Get a Professional Service

It’s important to get legal assistance when dissolving an LLC. With that, you must have a Registered Agent. Ensure that the Registered Agent you choose is qualified and legal since they will file the Article of Dissolution for your LLC. We reviewed the Best Registered Agent Services in Illinois for you to check out.

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Step 3: Settle the Outstanding Debts and Liabilities

You must settle all outstanding debts and liabilities before dissolving your Illinois business. This includes paying off loans, settling pending lawsuits, paying owed taxes, and fulfilling any remaining contractual obligations. You can inform your Illinois Business Attorney to ensure it is settled.

To settle your Illinois business’ debts and liabilities:

  • Review your business’ financial records to identify all outstanding debts and liabilities.
  • Contact creditors, lenders, and other parties to whom your business owes money or obligations, and arrange for payment or settlement.
  • If your business does not have sufficient funds or assets to cover all outstanding debts and liabilities, consult with legal counsel to determine the best course of action for settling these obligations.

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Step 4: Distribute the Remaining Assets to Members

Once all debts and liabilities have been settled, you can distribute any remaining assets to the business members. Your operating agreement should do this or, if no such agreement exists, in proportion to each member’s ownership interest in the business.

To distribute assets:

  • Determine the fair market value of the remaining assets, such as real estate, equipment, or inventory. 
  • Calculate each member’s ownership interest in the business based on the operating agreement or their initial capital contribution.
  • Distribute the assets to each member according to their ownership interest.
  • Keep detailed records of all asset distributions for tax and legal purposes.

Step 5: File the Articles of Dissolution

After settling debts and distributing assets, you’ll need to file the Articles of Dissolution with the Illinois Secretary of State to dissolve your Illinois business officially. This document provides the state with notice that your business is ceasing operations and will no longer conduct business.

To file the Articles of Dissolution:

  1. Obtain the appropriate form from the Illinois Secretary of State‘s website. Access the Illinois Secretary of State’s website and navigate to the Business Services section for the required forms and instructions.
  2. Fill out the Articles of Dissolution Form with the required information, including your Illinois business name, the date of dissolution, and any other necessary details.
  3. Pay the filing fee of $5 in the Illinois Secretary of State’s office.
  4. Submit the completed form and payment to the Illinois Secretary of State’s office, either by mail or online, depending on your Illinois’s filing options.

Once your Articles of Dissolution have been processed and approved, your Illinois business will officially be dissolved.

Mail to: 
Illinois Secretary of State
Department of Business Services, Limited Liability Division, 501 S. Second St., Rm. 351, Springfield, IL 62746

Filling Fee:
$5

Step 6: Notify the IRS and Government Agencies

After dissolving your business with the Illinois Secretary of State, you’ll need to notify the Internal Revenue Service (IRS) and other Illinois government agencies of the dissolution. This is important to ensure your business complies with tax laws and other regulations.

To notify the IRS of the dissolution:

  1. File your final federal tax return using Form 1065 and check the box indicating that it is the final return for your business.
  2. Cancel your Employer Identification Number (EIN) in Illinois by mailing a letter to the IRS at the address where you filed your tax return. Include your EIN, business name, and reason for cancellation in the letter.
  3. Update your Illinois business status with any other relevant government agencies, such as the Illinois Department of Revenue, Department of Labor, and local licensing and permitting offices.

Step 7: Cancel Licenses, Permits, and Insurance Policies

To fully dissolve your Illinois business, you’ll need to cancel any business licenses, permits, and insurance policies associated with your business. This may include Illinois Business Licenses, professional licenses, sales tax permits, and any other permits required for your industry.

You must contact the issuing agency to cancel your licenses and permits and follow their specific cancellation procedures. You should also contact your insurance provider to cancel any remaining business insurance policies. With the cancellation of the mentioned licenses, permits, and Business Insurances in Illinois, you also need to remove a Registered Agent since he won’t be able to continue filing documents for your business unless you are the Registered Agent of your business. 

Step 8: Maintain Records of the Dissolution Process

For legal and tax purposes, it’s important to maintain detailed records of the steps taken to dissolve your Illinois business. This includes documentation of the formal vote to dissolve the business, debt settlements, asset distribution records, and copies of filed state and federal tax returns.

Keep these records for at least seven years, as they may be needed in the event of an IRS audit or other legal issues arising from the dissolution.

Cost of Dissolving an LLC in Illinois

The cost of dissolving an LLC in Illinois can vary based upon various factors. The Illinois Articles of the Dissolution filing fee cost $5. Other costs include any outstanding taxes or debts the business owes and potential costs for settling business contracts or selling business assets.

It’s also important to factor in professional fees, such as if you hire an attorney or accountant to assist with the dissolution process. After the LLC is dissolved, the remaining company assets are divided among the members. The exact breakdown of these costs can often be complex and will depend on the specific circumstances of the LLC, so consulting with a legal or financial advisor can be helpful.

Reasons Why an LLC in Illinois Dissolves

There are numerous reasons why an LLC in Illinois dissolves, and these reasons could impact other LLCs. It is best to understand the why’s and how to deal with it rather than knowing that your LLC may dissolve sooner or later. Here is the list of possible reasons why an LLC dissolves.

  1. Expired Duration: In Illinois, an LLC will automatically dissolve if it reaches the end of its defined duration stated in the Articles of Organization.
  2. Member Vote: An LLC may dissolve in Illinois if the members vote for dissolution. Usually, the LLC Operating Agreement outlines the percentage of member votes required to dissolve the LLC.
  3. Judicial Dissolution: A court in Illinois may order the dissolution of an LLC if it is in the best interests of the members, especially in cases of fraud, illegal activities, or oppressive behavior.
  4. Bankruptcy: If the LLC becomes insolvent and cannot pay its debts, it may be forced into bankruptcy. This usually leads to the dissolution of the LLC.
  5. Non-compliance: If the LLC does not comply with state laws or fails to meet legal requirements, such as filing annual reports or paying taxes, the state may forcibly dissolve the LLC.
  6. Merger or Consolidation: If the LLC in Illinois merges or consolidates with another company and the LLC is not the surviving entity, it will be dissolved.
  7. Death or Withdrawal of a Member: Unless specified otherwise in the Operating Agreement, the death, withdrawal, bankruptcy, or incompetence of a member may cause the LLC to dissolve.

Please note that the process for dissolution typically includes settling all business debts, distributing any remaining assets among the members, and filing a formal notice of dissolution with the Illinois Secretary of State.

After the Illinois LLC Dissolution

Once your Illinois business has been dissolved, it typically cannot be reinstated or “taken back” after a few years. Instead, you would need to form a new LLC in Illinois if you wish to operate a business under a limited liability company structure again.

To create a new Illinois LLC, you would need to follow the standard formation process, which generally includes the following:

  • Choosing a Unique Business Name: Ensure that another business does not already use the name you choose in Illinois and complies with state-specific naming requirements.
  • Appointing a Registered Agent: Designate a Registered Agent who will be responsible for receiving legal correspondence on behalf of your LLC.
  • Filing Articles of Organization: Submit the Articles of Organization with the Illinois Secretary of State’s office, along with the required filing fee.
  • Creating an Operating Agreement: Draft an agreement outlining the rules and regulations governing your new LLC, including member roles, ownership percentages, and management structure.
  • Obtaining Necessary Licenses and Permits: Apply for any required business licenses, permits, and tax registrations with the appropriate state and local authorities.
  • Registering with the Internal Revenue Service (IRS): Obtain an Employer Identification Number (EIN) from the IRS, which will be necessary for tax purposes and other business activities.

Availability of the Business Name

When a business is in Illinois was dissolved, the business name becomes available for other business owners to use after a certain period. However, the specific rules and regulations regarding the availability of a dissolved business name can vary. Keep in mind that even if the name becomes available, other factors, such as trademarks or potential confusion with existing businesses, may still impact the ability of another business owner to use the name.

FAQs

How do I dissolve an Illinois llc?
You must file articles of dissolution with the Illinois Secretary of State.
Can an Illinois llc dissolve voluntarily?
Yes, an Illinois llc can voluntarily dissolve by filing articles of dissolution.
Is there a fee to dissolve an Illinois llc?
Yes, there is a $5 filing fee to dissolve an Illinois llc.
Can a dissolved Illinois llc be reinstated?
Yes, a dissolved Illinois llc can be reinstated if it meets certain requirements and pays associated fees.
What is the process for dissolving an Illinois llc?
The process includes filing articles of dissolution with the Illinois Secretary of State, paying the filing fee, and notifying creditors and other interested parties of the dissolution.
How much does it cost to reinstate an Illinois llc?
The cost to reinstate an Illinois llc varies based on the reason for the dissolution, but typically includes fees and penalties.
What is the deadline for filing articles of dissolution for an Illinois llc?
There is no deadline for filing articles of dissolution for an Illinois llc, but it should be done as soon as the decision to dissolve is made.
Will my Illinois llc be liable for future debts and obligations after dissolution?
No, after the Illinois llc is dissolved, it is no longer liable for future debts and obligations.
Can I form a new llc in Illinois after dissolving my current one?
Yes, you can form a new llc in Illinois after dissolving your current one.
How long does it take to dissolve an Illinois llc?
The process of dissolving an Illinois llc typically takes a few weeks to a few months, depending on various factors.
Do I need to pay outstanding fees or taxes before dissolving my Illinois llc?
Yes, you must pay all outstanding fees and taxes before dissolving you Illinois llc.
Can I dissolve my Illinois llc without notifying creditors?
No, you must notify creditors and other interested parties of the dissolution of your Illinois llc.
Can I dissolve my Illinois llc if there is pending litigation?
It may be possible to dissolve your Illinois llc if there is pending litigation, but the process can be complicated.
Will the state of Illinois provide instructions on dissolving an llc?
Yes, the Illinois Secretary of State’s website provides detailed instructions on how to dissolve an llc.
Will dissolving a foreign llc in Illinois affect the status of the llc in other states?
Dissolving a foreign llc in Illinois may affect the status of the llc in other states, depending on the laws of those states.
What happens to the assets of an Illinois llc after dissolution?
The assets of an Illinois llc are distributed to its members after dissolution.
Can a dissolved Illinois llc continue to operate under a new name?
No, a dissolved Illinois llc cannot continue to operate under any name, including a new name.
Can someone else use the name of my dissolved Illinois llc?
Yes, someone else might be able to use the name of your dissolved Illinois llc if you don’t protect its trademark.
Can I change my mind and cancel the dissolution of my Illinois llc?
It may be possible to cancel the dissolution of your Illinois llc before it is finalized, but the process can be complicated.
How long do I have to notify the Illinois Secretary of State of my llc’s dissolution?
There is no deadline to notify the Illinois Secretary of State of your llc’s dissolution, but it should be done as soon as possible.
Can I sell my Illinois llc before dissolution?
Yes, you can sell your Illinois llc before dissolution, but the new owners must agree to file articles of dissolution after assuming control.
Can I dissolve my Illinois llc if I’m in the middle of bankruptcy?
It may be possible to dissolve your Illinois llc if you’re in the middle of bankruptcy, but seek legal advice before proceeding.
Are there any tax consequences to dissolving an Illinois llc?
Yes, dissolving an Illinois llc may result in tax consequences, such as filing final tax returns and settling outstanding tax liabilities.
What should I do after Illinois dissolves my llc automatically?
After Illinois dissolves your llc automatically, you should start the process of reinstating it as soon as possible.
What happens to operating agreements during the dissolution of an Illinois llc?
Operating agreements become void when an Illinois llc dissolves.
Can I still do business in Illinois if my llc is dissolved?
No, if your Illinois llc is dissolved, you cannot continue to do business in Illinois.
Do I need to hire a lawyer to dissolve my Illinois llc?
You don’t need to hire a lawyer to dissolve your Illinois llc, but it’s advisable to seek legal advice if you have any questions or concerns.
Can I dissolve my Illinois llc online?
No, you cannot dissolve your Illinois llc online. You must file articles of dissolution with the Secretary of State by mail or in person.
Can I dissolve my llc in Illinois if it is in good standing?
Yes, you can dissolve your llc in Illinois if it is in good standing, but make sure you follow proper procedures.
How do I dissolve my Illinois LLC?
You can dissolve your Illinois LLC by filing Articles of Dissolution with the Illinois Secretary of State.
Do I need to notify any other agencies in Illinois when dissolving my LLC?
Yes, you will need to notify the Illinois Department of Revenue and the Illinois Department of Employment Security.
Do I need to pay any fees when dissolving my Illinois LLC?
Yes, there is a $5 fee to file Articles of Dissolution with the Illinois Secretary of State.
How long does the dissolution process take for an Illinois LLC?
The dissolution process for an Illinois LLC usually takes about 3-5 business days after the filing has been submitted.
Can I dissolve my Illinois LLC online?
Yes, you can file Articles of Dissolution online through the Illinois Secretary of State’s website.
What if my Illinois LLC owes taxes or other debts?
You will need to pay off any outstanding taxes or debts before your LLC can be fully dissolved in Illinois.
How will I know when the Illinois LLC has been fully dissolved?
Once your Articles of Dissolution have been processed and approved by the Illinois Secretary of State, you will receive a certificate of dissolution.
How do I cancel my LLC registration with the Illinois Department of Revenue?
You will need to file a Certificate of Cancellation of Registration form with the Illinois Department of Revenue.
Do I need to file a final tax return for my Illinois LLC before dissolving?
Yes, you will need to file a final tax return with the Illinois Department of Revenue.
How long do I have to file a final tax return for my Illinois LLC?
You must file a final tax return within one year of your LLC’s dissolution date in Illinois.
What happens if I don’t file a final tax return for my Illinois LLC before dissolving?
You may face penalties and interest charges from the Illinois Department of Revenue.
Can I dissolve my Illinois LLC if I have pending lawsuits or judgments against it?
It’s best to resolve any pending lawsuits or judgments against your LLC before you dissolve it in Illinois.
What do I do with my Illinois LLC’s assets when dissolving?
You will need to distribute the LLC’s assets according to the operating agreement or to the owners of the LLC before dissolving.
Can I sue my business partners when dissolving an Illinois LLC?
It is possible to sue business partners in Illinois when dissolving an LLC, but it’s best to consult with an attorney before taking any legal action.
Can I reinstate my dissolved LLC in Illinois?
Yes, you can reinstate your dissolved Illinois LLC by filing a reinstatement form and paying appropriate fees to the Secretary of State.
Can I dissolve my Illinois LLC if it’s been administratively dissolved by the state?
Yes, you can file for voluntary dissolution even if the state has administratively dissolved your Illinois LLC, but you will need to resolve any outstanding issues before doing so.
How do I dissolve an LLC if it has multiple owners?
You will need to follow the procedures outlined in the operating agreement for dissolving an Illinois LLC with multiple members.
Do I need to notify my Illinois LLC’s creditors when dissolving it?
It’s not legally required to notify creditors of an LLC’s dissolution in Illinois, but it’s a good practice to do so.
Who is responsible for notifying the state of Illinois about my LLC’s dissolution?
Anyone authorized to act on behalf of the LLC can file the Articles of Dissolution with the Illinois Secretary of State.
Can I sell my Illinois LLC when dissolving it?
Yes, you can sell your Illinois LLC during the process of dissolving it if the operating agreement allows for such a transaction.
Can I transfer ownership of my Illinois LLC before dissolving it?
Yes, you can transfer ownership of your Illinois LLC before dissolving it if the operating agreement allows for such a transaction.
How do I terminate my Illinois LLC’s business licenses and permits when dissolving?
You will need to contact the relevant licensing agencies in Illinois to terminate any business licenses and permits for your LLC.
Can I dissolve my Illinois LLC if it has outstanding loans?
Yes, you can dissolve your Illinois LLC even if it has outstanding loans, but you will need to pay off those loans with the LLC’s assets before dissolving.
How do I update the Illinois Secretary of State if my LLC’s address has changed since filing Articles of Organization?
You can update your Illinois LLC’s address by filing an Annual Report or a Change of Registered Agent/Office form with the Secretary of State.
Do I need to file an Annual Report before dissolving my Illinois LLC?
Yes, you will need to file any necessary Annual Reports before dissolving your Illinois LLC.
What happens to my Illinois LLC’s name after it has been dissolved?
Once your Illinois LLC has been dissolved, the name becomes available for others to use.
When is the best time to dissolve my Illinois LLC?
The best time to dissolve your Illinois LLC is when you are sure that it is no longer needed and all debts and taxes have been paid off.

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Conclusion

Dissolving Illinois business can be complex and time-consuming, but following the steps outlined in this guide will help ensure a smooth and successful dissolution. By conducting a formal vote, settling debts and liabilities, distributing assets, filing the Articles of Dissolution, notifying government agencies, and canceling business licenses and permits, you can legally dissolve your Illinois business and move forward with the next chapter of your professional life.

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