What is a Limited Liability Company Certificate of Dissolution? Why is it Important?

Business Interest Transfer- Excise TaxBusiness owners contemplating shutting their doors may have many questions regarding the appropriate manner to dissolve and wind-up a business entity. While it is vital for an entity to maintain appropriate records when the business is operation[1], it is equally important to take appropriate steps to discontinue business. Methods of Dissolving an LLC In Washington, a limited liability company (“LLC”) may be dissolve in several ways: (1) the  LLC’s governing documents provide that the LLC will only remain in existence for a specified number of years; (2) on the happening of events specified in the LLC operating agreement[2]; (3) on the written consent of all LLC members; (4) following the dissociation of the last remaining member; (5) upon the entry of a decree of judicial dissolution; (6) upon the administrative dissolution of an LLC by the Secretary of State (unless the LLC is reinstated). See RCW 25.15.270. A Washington Court may enter a decree of judicial dissolution at the request of an LLC member or manager, if it is established that: “(1) it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement; or (2) other circumstances render dissolution equitable.” See RCW 25.15.275. Similarly, the Secretary of State has authority to administratively dissolve an LLC in specified circumstances, including the LLC’s failure to pay licensing fees and file its initial or annual report when due. RCW 25.15.280. The LLC can be reinstated following administrative dissolution if it applies for reinstatement with the Secretary of State within a specified timeframe. See RCW 25.15.290. The LLC Certificate of Dissolution 2010 amendments to the Washington Limited Liability Companies Act, Chapter 25.15 RCW, greatly increase the importance of an LLC Certificate of Dissolution. A Certificate of Dissolution is a relatively simple document that is prepared and filed with the Secretary of State following dissolution. See RCW 25.15.273. No fees are due to the Secretary of State upon filing the Certificate of Dissolution. WAC 434-130-090. However, the act of filing the Certificate of Dissolution limits the ability of individuals or entities to sue the LLC, its managers, or members for claims that arose prior to or after dissolution. See RCW 25.15.303. Specifically, if an LLC files a Certificate of Dissolution, a statute of limitations is triggered requiring persons or entities having claims against the LLC to file suit within three years after the filing of the Certificate of Dissolution. For failing businesses that may face legal disputes following dissolution, the Certificate of Dissolution can be very useful in cutting off claims as the LLC winds-up its business. If you are considering dissolving a LLC or have questions regarding LLC governance, a Spokane business attorney can help. Wolff, Hislop & Crockett prides itself on being a trusted legal resource for businesses in the Spokane, Spokane Valley, and Liberty Lake areas and beyond. Contact us today for a consultation. Image: FreeDigitalPhotos.net


[1] For more information on business recordkeeping, see our blog The Importance of Maintaining Corporate Records. [2] For more information on limited liability company operating agreements, see our blog What is a Limited Liability Company Operating Agreement?

 

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