Because they provide flexibility, limited liability protection, and pass-through taxation, limited liability corporations (LLCs) are common business organizations in the United States. However, LLCs may experience difficulties and disagreements among their partners or members, just like any other business form. One of the frequent queries is whether a partner can compel the LLC to dissolve or terminate. In this article, we’ll look at the response to that query and offer more details on related subjects like declaring an LLC’s owner publicly, removing a partner from an LLC, changing an LLC’s status with the IRS, and filing a certificate of termination in Texas. Can a Partner Force an LLC to Dissolve?
In general, unless the operating agreement of the LLC or state law permits it, a single member or partner cannot compel the dissolution of an LLC. The default norm, which is followed by the majority of states, is that LLCs cannot be dissolved, either voluntarily or involuntarily, without the approval of all members or by a court order. As a result, if one partner wants to dissolve the LLC but the other partners do not, they may need to negotiate and come to an agreement. For example, they could buy out the partner who is dissident’s stake or change the operating agreement to incorporate triggers or procedures for dissolution.
There are a few exceptions to this rule, though. For instance, if the management of the LLC is impassed or if the LLC is being run in an oppressive, dishonest, or unlawful manner, several jurisdictions permit a partner to ask the court for judicial dissolution. In such circumstances, the court may mandate the dissolution of the LLC or appoint a receiver to oversee its operations. Furthermore, many operating agreements can have dissolution triggers, such as the demise, incapacity, or insolvency of a partner, which could result in a required dissolution unless the other partners agree to continue the business.
The Texas Secretary of State must receive a certificate of termination if you choose to voluntarily dissolve your LLC there. The certificate must say that the LLC has been dissolved in compliance with the Texas Business Organizations Code and provide the name, filing number, and creation date of the LLC. A declaration that the LLC has no known obligations, a plan to pay off any ongoing debts, or a declaration that the LLC has adequately budgeted for payment of all known liabilities must also be included. A certificate of termination is currently filed for $40. Aside from notifying other pertinent organizations and creditors of the dissolution, you might also need to submit final tax returns with the IRS and the Texas Comptroller of Public Accounts.
Unless the operating agreement specifically permits such removal or the partner participates in behavior that is contrary to the agreement or state law, a partner generally cannot be expelled from an LLC without their consent. For instance, the surviving partners may have cause to terminate a partner’s membership in the LLC if they have violated their fiduciary obligations, committed fraud or other criminal action, or if they become unable or incompetent. However, the operating agreement and state legislation will determine the precise steps and prerequisites for removal. To ensure that you follow the proper steps and prevent legal problems, it is advised that you speak with an attorney before seeking to remove a partner from an LLC. How Do I Modify My LLC with the IRS With Regard To This?
By submitting Form 8822-B, Change of Address or Responsible Party – Business, you can tell the IRS of any changes to your LLC’s tax status, name, address, or other details. Any changes to the LLC’s mailing address, physical address, legal name, trade name, responsible party, or other contact information must be reported to the IRS using this form. In order to avoid penalties or delays in obtaining crucial tax notices or refunds, you must submit this form within 60 days of the change. If you only need to update your LLC’s name or tax classification, you can simply include the changes in your next tax return and avoid having to submit this form. Is the LLC Owner’s Information Public?
The owner or owners of an LLC are typically not compelled to make their identities or other personal information public. Instead, the name and address of the registered agent, who is tasked with receiving legal and tax notices on behalf of the LLC, may only be listed in the LLC’s formation documents, such as the articles of organization or certificate of formation. The names and addresses of the LLC’s owners or managers may need to be disclosed in annual reports or other papers, according to various state laws. The owners may also be obliged to provide their identities and financial information to the court and other parties involved if the LLC is embroiled in litigation or declares bankruptcy.