Dissolving a Limited Liability Company (LLC) in North Dakota involves a series of legal and administrative steps designed to ensure that the entity is properly terminated, its debts are settled, and any remaining assets are distributed among the members. The process is governed by state law, specifically the North Dakota Uniform Limited Liability Company Act found at chapter 10-32.1 of the North Dakota Century Code. The following is a very general description of the dissolution process.

Reasons For Dissolving An LLC

LLCs may be dissolved for a number of reasons, either voluntarily or involuntarily. Section 10-32.1-50 specifies the events causing dissolution. Those events include:

• An event or circumstance that the operating agreement states causes dissolution;
• The consent of all the members;
• Following the admission of the initial member or members, the passage of ninety consecutive days during which the company has no members;
• On application by a member, the entry by appropriate court of an order dissolving the company on the grounds that:

1. The conduct of all or substantially all of the activities of the company are unlawful; or
2. It is not reasonably practicable to carry on the activities of the company in conformity with the articles of organization and the operating agreement.

N.D.C.C. § 10-32.1-50(1).

An LLC may be dissolved on application of a member if the other members, manager, or governors are acting or will act illegally, fraudulently, or oppressively with direct harm to the applicant. N.D.C.C. § 10-32.1-50(1)(e).

Lastly, an LLC may be involuntarily terminated (not dissolved) by operation of law if it fails to file its annual report. N.D.C.C. § 10-32.1-90.

Operating Agreement And Applicable Law

The first step in dissolving an LLC is to review the company’s Operating Agreement. This document may control the events, conditions, obligations, and restrictions related to dissolution. The Operating Agreement also may set out the approval and dissolution processes. If the Operating Agreement doesn’t speak to dissolution, then the LLC will follow North Dakota Uniform Limited Liability Company Act’s default rules. The default approval process depends on how the LLC is managed. See N.D.C.C. § 10-32.1-39.

Filing Articles Of Dissolution

Once the members agree to dissolve the LLC, the next step is to file Articles of Dissolution with the North Dakota Secretary of State. This document serves as official notice to the state that the LLC is terminating its existence. Once the Articles of Dissolution are filed and processed, the LLC is officially in the process of winding up its affairs.

Winding Up Business Affairs

Section 10-32.1-51(2) provides the process for winding up:

1. In winding up its activities, a limited liability company:

• Shall discharge the debts, obligations, or other liabilities of the company, settle and close the activities of the company, and marshal and distribute the assets of the company; and
• May:

1. File with the secretary of state a notice of dissolution stating the name of the company and that the company is dissolved;
2. Preserve the company activities and property as a going concern for a reasonable time;
3. Prosecute and defend actions and proceedings, whether civil, criminal, or administrative;
4. Transfer the property of the company;
5. Settle disputes by mediation or arbitration;
6. File with the secretary of state articles of dissolution and termination stating the name of the company and that the company is terminated; and
7. Perform other acts necessary or appropriate to the winding up.

Creditor Notification

LLCs have several options with respect to notification of creditors. For known creditors, it can provide notice. N.D.C.C. § 10-32.1-52(2). The upside to delivering notice to known creditors is that it sets a 120-day deadline for claims. LLCs also have the option to publish notice of dissolution for unknown credits. N.D.C.C. § 10-32.1-53. The upside to publishing is that it sets a 5-year deadline for claims. Without notice to known creditors and publishing notice, a creditor would have up until the normal statute of limitations to make a claim.

Asset Distribution

Once debts and obligations are satisfied, the remaining assets of the LLC are distributed to the members. The Operating Agreement may dictate how assets are distributed, but if there is no agreement, North Dakota law governs the process. See N.D.C.C. § 10-32.1-54.

Tax Filings

The dissolution process also may require a final tax return. LLCs going through this process are encouraged to discuss this with their tax professionals.

Conclusion

If you need assistance dissolving your LLC, please email SW&L’s Business Law attorneys at info@swlattorneys.com or call (701) 297-2890.

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