Dissolution Of An LLC In Washington State – What Happens?

Posted: Feb 28, 2019

By: Washington State Business Law Lawyer David C. Tingstad

All limited liability companies embark upon journeys of varying length, activity, and consequence. Eventually, LLCs reach their journeys end and require dissolution. The process of dissolution and the time dissolution requires is different for every LLC, but what really happens with an LLC upon dissolution?

Dissolution

LLCs dissolve for a multitude of reasons. For example, the LLC agreement may provide for an event or date of dissolution, the members may consent to dissolution, the LLC can dissolve administratively (via the Secretary of State) or judicially (via a court decision). However, dissolution does not end the entity, nor does the liability shield provided by the LLC cease to exist upon dissolution.

“Winding Up”

Upon dissolution of the LLC, its affairs must be “wound up”. The “winding up” process is typically completed by the LLC’s manager or its members and may include the filing of a certificate of dissolution.  Whoever conducts the process must, in an orderly fashion, gather the LLC’s assets, notify creditors of the LLC’s dissolution, make reasonable provision for creditors and distribute the balance (if any) in accordance with the LLC Agreement or the LLC Act.

If an orderly winding up process is followed, the known creditors paid, and provision made for the unknown or contingent creditors, then, and only then, may those holding economic rights receive a distribution of LLC assets. We find that most LLCs fail to complete an orderly winding up process and therefore expose the members to future liability.

Misunderstanding Dissolution

Many are under the mistaken understanding that when the Secretary of State administratively dissolves the LLC, that no further action is required.  Administrative dissolution provides no protection to the members from the creditors of the company, and often has unintended consequences not considered by the members.  Other misunderstandings include a belief that the LLC’s existence ends upon dissolution.  It does not.  The LLC’s existence continues, notwithstanding dissolution.  However, a dissolved LLC must take new steps as a result of dissolution – steps most business owners fail to take.

At Beresford Booth, our lawyers hold decades of experience in business matters, including matters involving LLCs. We would be pleased to examine your company and assist you to ensure the best possible outcome for the business matters that concern you.

Beresford Booth PLLC (425.776.4100), www.beresfordlaw.com

BERESFORD BOOTH PLLC has made this content available to the general public for informational purposes only. The information on this site is not intended to convey legal opinions or legal advice.

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