Q&A with Matt Hopkins
LLC closing requires paperwork
Q: If siblings own a business organized as a limited liability company and want to close it, do they need a written agreement?
A: Yes. Ending a business properly requires written documents. It is often tempting, especially when doing business with family or friends, to just shut the doors, pay the bills, divide up the stuff and move on down the road. Resist the temptation. When you close the door on this chapter of your business life, make sure the door is completely shut before turning your back. Otherwise, unresolved, lingering issues may surprise you when you least expect.
Hopefully, your limited liability company has a written operating agreement. The operating agreement, usually adopted when the company is formed, should set out important provisions regarding how the company and its members are to treat each other. The operating agreement usually will determine the documents that are needed to properly dissolve the company and wind up its business. In most cases, members of the company will need to vote to dissolve the company, but some operating agreements provide for other ways to shut the company down. It is important to prepare documents that show the terms of the operating agreement were either followed or properly waived.
Q: What if there is no agreement?
A: If the company does not have an operating agreement, dissolution can be done following the provisions of the Oklahoma Limited Liability Company Act. To greatly simplify the matter, the act allows companies, even in the absence of operating agreements, to dissolve with the written consent of all owners. Courts also can order that limited liability companies by dissolved. In either event, a written document is required.
Q: Anything they need to file to make it legal?
A: You also must file Articles of Dissolution with the Oklahoma Secretary of State. The document is available on the secretary's website. It must be signed by a manager and requires a $50 filing fee.
But dissolving the company is, actually, just the beginning. You also must wind up the company's affairs. You must pay all creditors and distribute the remaining assets to the company owners in the proper way. The operating agreement probably provides some guidance, but without an operating agreement, the process is governed by the act. Quality written accountings, distribution agreements and receipts are paramount. Before you close up shop, be sure everyone knows and accepts the plan to avoid future disputes. And put it in a writing signed by all owners.
PAULA BURKES, Business Writer