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RayAnswers, Attorney
Category: Estate Law
Satisfied Customers: 41569
Experience:  Texas lawyer for 30 years in Estate law
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Ray Back to the LLC. We have decided that we need to close

Customer Question

RayBack to the LLC.We have decided that we need to close the LLC.I am 90% owenr and my son is 10% owner.What are the tax implications if any?We have no debts and all property is free and clear.As my son is going to live in the house that we used for our bed and breakfast we can no longer offer services.
Submitted: 1 year ago.
Category: Estate Law
Expert:  RayAnswers replied 1 year ago.

Hi and welcome to JA. Ray here to help you again.

Here are the steps to winding down an LLC in South Dakota.

Here to voluntarily dissolve your LLC, you would look to the company’s operating agreement. In most cases, it will contain a section with rules for how to dissolve the company.

Normally your corporate rules will require a vote of the LLC members on a resolution to dissolve, and more specifically a requirement that some number or 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. Also make sure to record the decision to approve the resolution in the official minutes of the dissolution meeting or on a written consent form.

You would need to file a final LLC tax return as well if there was any business for 2016.

It is possible that the members here if there is distribution may have some personal taxes due for such distribution.

Here is good step step to do all of this.

I appreciate the chance to help you today.Thanks again.

Expert:  RayAnswers replied 1 year ago.

Under South Dakota law, one way to give notice is by sending a written document directly to known claimants after the effective date of dissolution. Proper written notice must:

  • specify the information required to be included in a claim
  • provide a mailing address where the claim is to be sent
  • state the deadline for receipt of the claim, which may not be less than 120 days after the date the written notice is received by the claimant; and
  • state that the claim will be barred if not received by the deadline.

You also may give notice to other (unknown) claimants by publishing in a newspaper. As with sending direct notice to known claimants, there are specific rules for giving notice through publication. Generally speaking, claimants have five years after the date of newspaper publication to bring a claim.

Expert:  RayAnswers replied 1 year ago.

Summary of closing steps.

1. Distribute all remaining assets of the South Dakota LLC

If the South Dakota LLC has any remaining assets, these may be divided according to the Members' ownership interests in the SD Limited Liability Company. All distributions to LLC Members must be reported to the IRS.

2. Close all business bank accounts of the South Dakota LLC

If there are any business accounts that have been opened for the South Dakota LLC then those accounts must be closed. If Company Business accounts are left open there may be liability and obligations of the Dissolved South Dakota LLC which could lead to legal problems down the line.

3. Cancel all local business licenses and permits of the SD LLC

If the South Dakota LLC has obtained any state, regional, county or city business licenses or permits, each of those must be cancelled to avoid any reporting or fiscal obligations of the South Dakota LLC. This includes business registration licenses as well as reseller permits.

4. File IRS Form 966

Most Dissolved South Dakota LLCs must file IRS Form 966 with the US Internal Revenue Service. If a South Dakota LLC is required to file IRS Form 966, the filing is required within 30 days after the final Dissolution plan is approved. Filing IRS Form 966 lets the Federal Government know that the South Dakota LLC has been legally Dissolved so that it may take the appropriate actions.

  • We can prepare IRS Form 966 for you to file.

5. Cancel the IRS account associated with the SD LLC's Federal Tax ID (EIN)

A Federal Tax ID, or Federal Employer Identification Number (EIN), is like the Social Security Number for the South Dakota LLC. Once the IRS links an EIN to a South Dakota LLC, that EIN stays with the South Dakota LLC even after the Company has been Dissolved by the South Dakota Secretary of State.

When the IRS processes the final tax return for the South Dakota LLC, they automatically make the EIN inactive. However, the account associated with the EIN is not automatically closed. Closing the account associated with the EIN lessens the likelihood of any problems with the EIN account, or with the IRS, in the future.