Closing your Rhode Island limited liability company (LLC) will involve a variety of tasks. Among the most important are what is known as dissolving and winding up the business.
Dissolving Your LLC
Your LLC is registered with the State of Rhode Island. Officially ending its existence as a state-registered business entity and putting it beyond the reach of creditors begins with a formal process called “dissolution.” While an LLC may be involuntarily dissolved through a court decree or have its certificate of organization revoked for administrative reasons (such as failing to file annual reports or pay taxes), this article covers voluntary dissolution by the LLC members.
In order to voluntarily dissolve your LLC, you first should look to the company’s formational documents—the articles of organization and operating agreement. In most cases, one of those two documents will contain a section with rules for how to dissolve the company. Typically the rules will require a vote of the LLC members on a resolution to dissolve and a requirement that some percentage of members vote in favor of the resolution. Make sure you follow any specific procedural requirements that may be part of the dissolution rules, such as setting a specific time to meet and vote and giving advance notice to all members regarding the meeting.
You should also be aware that, unless otherwise provided in your articles of organization or operating agreement, Rhode Island’s LLC Act allows for an alternative method to voluntarily dissolve an LLC. Under those rules, for those LLC members entitled to vote, you need an affirmative vote by “a majority of the capital values of all membership interests which have not been assigned.” (In many cases, this will simply mean a majority vote by the LLC members.)
Regardless of whether you dissolve the LLC based on rules in formational documents or on a majority voting member vote, you should make sure to record the decision to approve the resolution in the official minutes of the dissolution meeting or on a written consent form.
“Winding Up”
Following the vote or other necessary action to dissolve your LLC, the company continues to exist for the purpose of taking care of certain final matters that are known as “winding up” the company. You may choose to designate one or more LLC members or managers to handle the winding up.
Compared to most other states, Rhode Island’s LLC Act provides minimal information about tasks included in winding up, and focuses mainly on how assets are to be distributed following dissolution. You are required to distribute LLC assets in a particular order. You first must pay creditors, including LLC members who are creditors, to the extent permitted by law. It is particularly important that you pay all outstanding taxes. Next, unless your formational documents provide otherwise, you should make any required “interim” distributions to current and former LLC members based, for example, on a member’s withdrawal from the company or on previous unanimous agreement of company members for an interim distribution. Finally, unless your formational documents provide otherwise, you should distribute any remaining assets (a) to return to members their “capital values” (their capital contributions to the company), and then (b) to members in the proportions in which they share in distributions.
Tax Clearance
Rhode Island requires that your LLC be in good standing with the Division of Taxation (“DOT”) before you can file articles of dissolution. (Articles of dissolution are discussed below). You will need to complete and file a request for a letter of good standing with the DOT. There is a $50 fee to file the request. A request form is available on the DOT website. Apart from providing various other information—LLC name, address, Secretary of State ID number, entity type, and so on—you should check off the box for “Filing for Articles of Dissolution” in Section V of the form (Dissolution/Cancellation of Domestic Entities).
It often takes four weeks to get a letter of good standing, but processing time can vary depending on specific circumstances.
Also, for federal tax purposes, make sure to check the “final return” box on your IRS Form 1065 when you file your final federal tax return.
Articles of Dissolution
After obtaining your letter of good standing from the DOT, and within 30 days of dissolving and winding up your LLC, you must file articles of dissolution with the Secretary of State (“SOS”). The articles of dissolution will contain basic information about your dissolved LLC, including:
- the LLC’s name
- the filing date for the original articles of organization
- the filing dates of all amendments to the original articles of organization or the most recent restatement, if any, and of all subsequent amendments to the articles of organization
- the reason for filing the articles of dissolution (such as unanimous member vote); and
- the effective date for the dissolution.
You must also include your original letter of good standing from the DOT, and the articles must be signed by an authorized individual.
There is a $50 fee to file the articles. Your filing usually will be processed within 7 to 10 business days. You can also receive expedited processing if you deliver the articles in person to the SOS. An articles of dissolution form is available for download from the SOS website.
Be aware that your business name will become available for use by others after dissolution.
Note on Out-of-State Registrations
Is your LLC registered or qualified to do business in other states? If so, you must file separate forms to terminate your right to conduct business in those states. Depending on the states involved, the form might be called a termination of registration, certificate of termination of existence, application of withdrawal, or certificate of surrender of right to transact business. Failure to file the additional termination forms means you’ll continue to be liable for annual report fees and minimum business taxes.
Additional Information
You can find additional information, including forms, mailing addresses, and filing fees, on the SOS website and DOT website.
For information on dissolving and winding up LLCs formed in other states, check Nolo’s 50-state series on dissolving LLCs.
Final Advice: Dissolving and winding up your LLC is only one piece of the process of closing your business. For further, general guidance on many of the other steps involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.
July 2013
