How to Dissolve an LLC in Michigan? (Step by Step Guide)

If you're a business owner in Michigan, there may come a time when you need to dissolve your LLC. This process can be complicated, so it's essential to understand the steps involved.

I teamed up with experienced legal advisors to provide you with a comprehensive guide on how to dissolve an LLC in Michigan. The article will also help you understand the reasons why an LLC is terminated.

Quick Summary

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Understanding Michigan LLC Dissolution

Dissolving a Michigan LLC is a formal process that involves winding up the business affairs of a limited liability company and officially terminating its existence in the eyes of the law.

This dissolution process is crucial as it releases the LLC and its members from their financial obligations, tax liabilities, and other responsibilities.

Governed by the Michigan Limited Liability Company Act, the dissolution process ensures that all legal and financial matters are properly addressed, providing a clear and structured path for LLC dissolution.

Understanding this process is essential for any business owner looking to dissolve their Michigan LLC.

Pre-Dissolution Requirements

Before you can dissolve an LLC in Michigan, several pre-dissolution requirements must be met to ensure a smooth transition.

First, review the LLC’s operating agreement to understand the specific procedures and triggering events for dissolution.

Next, obtain a tax clearance certificate from the Michigan Department of Treasury, which confirms that all tax liabilities are settled.

It is also crucial to notify creditors and claimants about the LLC’s impending dissolution to resolve any outstanding debts.

Additionally, you must settle all financial obligations, including outstanding tax liabilities, and close business operations by terminating contracts and distributing assets.

Complying with these pre-dissolution requirements is essential for a successful and legally compliant dissolution process.

6 Steps to Dissolving an LLC in Michigan

A Michigan limited liability company must undergo the dissolution process before ending its affairs. Here are the steps you must take to dissolve a Michigan LLC.

Step 1: Vote to Dissolve the LLC

LLC owners should first meet to discuss the dissolution. Only members of the LLC can give a dissolution vote.

The voting process and requirements should be outlined in the LLC operating agreement. If this document is absent, the state laws requires a unanimous vote for dissolution.

In our experience, our LLC had more than one owner, so we voted and considered how to deal with ownership interests.

Step 2: Notify Creditors About Your LLC's Dissolution

With the US Small Business Administration reporting that 20,402 Michigan establishments closed between March 2021 and March 2022, it's crucial when closing an LLC in Michigan to inform all creditors of the dissolution promptly to resolve any remaining debts or claims [1].

Additionally, it is essential to notify tax agencies, including filing final tax returns and obtaining a tax clearance certificate from the state to confirm that all tax obligations have been fulfilled before the LLC can be formally dissolved.

In our case, we communicated with our creditors through a written notice.

"Once creditors have been informed, the LLC needs to allow the claim period to lapse before allocating any leftover assets to its members, making sure to settle all legitimate claims beforehand."

-Jon Morgan, Co-Editor & Co-Founder of Venture Smarter

Step 3: File Final Tax Returns and Obtain Tax Clearance

Michigan Department of Treasury requires every Michigan LLC to obtain a tax clearance certificate that confirms that the tax liabilities of the LLC are up to date.

There is an online application form that you can fill out and submit electronically to file a tax clearance request which can be found on the Michigan Department of Treasury website.

Before issuing the tax clearance certificate, outstanding taxes, and various tax accounts must be paid in full. During our dissolution, our LLC owed some taxes, so we had to pay those off first before filing a tax clearance request.

The Department of Treasury also offers a payment plan for LLCs that owe back taxes. You can find more information about the payment plan on the Department of Treasury website.

Step 4: File Articles or Certificate of Dissolution

Every limited liability company in the state has to file Michigan LLC Articles of Dissolution before they can dissolve a Michigan LLC [2].

The Certificate of Dissolution is a document that officially ends your Michigan LLC. This form is filed with the Michigan Department of Licensing, Corporations Division.

We downloaded our dissolution form from the Department of Licensing and Regulatory Affairs website.

Articles of Dissolution can be filed online through the Department of Licensing and Regulatory Affairs Corporations website or by mail.

There is a $10 filing fee for dissolving an LLC in Michigan using the dissolution form.

After the Articles of Dissolution are filed, the Department of Licensing and Regulatory Affairs, Corporations Division will send you a Certificate of Dissolution, which confirms that your LLC has been dissolved.

Related Articles:

• Best Registered Agents in Michigan
• How to Apply for an LLC in Michigan
• Premium Michigan LLC Formation Services

Step 5: Distribute Assets

Before distributing any assets, our LLC paid off all its liabilities. This includes debts to creditors, outstanding loans, and any other financial obligations.

It's important to prioritize these payments according to the legal order of precedence as specified in Michigan law.

If the LLC's operating agreement specifies a particular method or order for distributing assets, those instructions must be followed. The operating agreement may outline specific percentages or methods for asset distribution among members.

Step 6: Close All Accounts and Cancel Licenses and Permits

Business entities in Michigan must close bank accounts, credit accounts, and any other accounts related to the business.

This includes canceling any licenses or permits with the Department of Licensing and Regulatory Affairs.

We also notified the Department of Treasury that our LLC is dissolving and they cancelled our LLC's tax registration.

Notify all relevant state and federal agencies about the dissolution. You should also inform any customers or clients who may have been doing business with the company.

FAQs

References:

1. https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-MI.pdf
2. /lara/-/media/project/websites/lara/cscl/folder1/731_08-15.pdf