Winding Up & Dissolving Your LLC: Your Options

You’ve decided to cease business operations & you no longer need your North Dakota limited liability company. What are your options?

You may have heard the terms “winding up” & “dissolution.” Winding up refers to winding up its business activities. It’s explained further in N.D.C.C. § 10-32.1-51. Winding up basically means discharging the LLC’s obligations, gathering its property, & settling disputes. What an LLC has to do to wind up is highly dependent on its operations. A holding company will have much less winding up than a company with a large payroll, for example.

Dissolution refers to dissolving the LLC legal entity. This means to end the LLC itself. You basically have two options to dissolve an LLC.

Option 1: Administrative Dissolution. The first option is to do nothing. You do not file annual reports. You do not pay the annual filing fee. The North Dakota Secretary of State will administratively dissolve your LLC. The upside to this is that it costs nothing & takes no effort. You literally do nothing. The downside is that dissolution takes quite awhile. Here’s an article explaining the dates & deadlines. If your LLC is in good standing, it’s going to take at least 6 months before it’s involuntarily terminated, then another 12 months until it cannot be reinstated. If someone has a claim against your LLC, it’s going to survive until the statute of limitations on that claim runs. These sorts of claims put the members, managers, & governors at risk because the LLC probably will be insolvent. Claimants against insolvent LLCs are more likely to try & pierce the corporate veil.

Option 2: Articles of Dissolution. The second option is to dissolve through articles of dissolution, notify known creditors, & publish notice to unknown creditors. The upside to this is time & liability limitation. Section 10-32.1-52 gives LLCs the right to notify known creditors. If the known creditor doesn’t make a claim within 120 days (or makes a claim & does not commence action within 90 days of the rejection), the claimant loses its claim. Section 10-32.1-53 gives the LLC the right to publish public notice & limit claims for unknown claims to 5 years (5 years is probably shorter than the applicable statute of limitations). The downside is some additional cost. The ND Secretary of State requires a small filing fee for articles of dissolution ($20.00 at the time of this article). You’ll also have some legal & publication costs.

Contact SW&L’s Business Law Group if you have questions about winding up & dissolving your LLC.

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