Closing an LLC After Bankruptcy: What You Need to Know
You took a chance and started a new business venture. Even though it didn’t turn out as you’d hoped, it’s still an accomplishment. But once you’ve filed for bankruptcy and your debts have been discharged, you’re not quite done yet. You’ll need to close your LLC to avoid tax issues, dissolve it as an entity, and prevent further financial issues.
Overwhelmed by everything that bankruptcy entails? You don’t have to go through this alone. With the help of the team at Padgett & Robertson, you can feel informed every step of the way. Call us at 251-336-3695 to set up a consultation now.
Bankruptcy Takes Care of the Assets and Debts—But Make Sure You Choose the Right Type
The bankruptcy process takes care of many of the tasks involved in closing your business and starting a new chapter. During the bankruptcy process, the assets belonging to your LLC will be liquidated and used to pay off any remaining debts to the extent that you are able. Your debts will be discharged.
However, there are two types of bankruptcy you may need to explore as you look into closing up your LLC. If you were able to secure loans under your LLC as a business entity, you are not personally responsible for those debts. This isn’t always possible, though, since banks aren’t likely to loan money to a new business with minimal assets. Because of this, many business owners take on personal debt for the purpose of building their LLCs.
If you have business debt that is the responsibility of your LLC, you will need to file for business bankruptcy. If you took on personal debt to build your LLC, you will need to file for personal bankruptcy. Either way, you will want to dissolve your LLC when all is said and done.
Your Business Still Exists. Find Out How to Dissolve it in Alabama
Each state has its own requirements for establishing and dissolving an LLC. To start your business, you registered with the state of Alabama. The process of dissolving your LLC will be overseen by the state.
You’ll start by finding the rules of dissolution in your governing documents. This often has specific procedural requirements that you’ll need to follow in order to terminate your business. If you cannot follow the terms in your documents or you do not have any terms regarding dissolution, you can dissolve your business by getting written consent from all of the LLC members.
Once you have finished this step, your business is in the “winding up” stage. This is when the business’s final tasks are finished, and the business is finally allowed to close. Under Alabama law, winding up involves:
- Handling any legal issues facing the LLC
- Settling disputes
- Ending all business proceedings
- Getting rid of the property and paying off liabilities
- Distributing assets
Some of these aren’t relevant, due to your bankruptcy. In general, you’ll want to make sure that you have finished all possible tasks and settled all issues that could affect your clients and customers.
Your articles of dissolution must be filed in the county in which your LLC was established. Fees are paid to the Secretary of State and the court that oversees your dissolution.
Cover Your Tax Issues
Alabama is one state that does not require you to get tax clearance prior to dissolution. When you file your federal taxes, you will mark the “final return” box to indicate that your business will not be filing any future tax documents.
A Bankruptcy Attorney Can Provide the Resources You Need
We know that this is a lot to handle, especially if you’re still in the final stages of your bankruptcy. This is one reason it’s helpful to hire a bankruptcy attorney. Your lawyer can provide the business resources you need to dissolve your LLC and get a fresh start.
Explore Your Options with Padgett & Robertson
If you’ve decided that bankruptcy is likely the right choice for you, let’s sit down and look at your finances, discuss your options, and make a plan. Set up a consultation with Padgett & Robertson now to get started. Just call us at 251-336-3695 or fill out our online contact form to schedule a meeting.
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