What are the reasons that an LLC may be dissolved in Virginia? | Ryan C. Young | Richmond, Virginia Business Attorney

In Virginia, an LLC may be dissolved for many reasons both voluntary and involuntary. Businesses come and go in a healthy economy, and Virginia’s Legislative Code (§§ 13.1-1048 – 13.1-1050) has provisions to make the dissolution of a business a relatively easy process in most cases.

In the most amicable of situations, an LLC is concluded upon the completion of events as put forth in the articles of organization or operating agreement. Or perhaps, all members of the LLC have mutually agreed that the time has come to move on, and together, written consent is given to dissolve the entity. Obviously, problems can arise when members cannot agree on the next steps. For example, one member may want to continue the business of the LLC while the other does not. There may also be accusations of malfeasance among the business partners.

This sounds neat and tidy, but of course, there are some housecleaning obligations that must be completed before submitting closing articles with the Virginia State Corporation Commission. All of the LLC’s affairs should be paid and discharged, or at least reasonable provisions should have been made. All debts, liabilities, and obligations of the company have been paid, and the LLC’s remaining property and assets have been distributed to its members. Once this due diligence has been accomplished, the LLC files closing articles with the Virginia State Corporation Commission.

There are three instances of involuntary dissolution prescribed in Virginia Code. (1) A judicial dissolution is issued when a member submits an application to the circuit court within the jurisdiction of the LLC’s registered office, asserting that it is no longer practicable to continue business as set in the articles of organization and operating agreement. (2) Uncompleted administrative tasks can put an LLC’s existence in jeopardy. An LLC can almost silently be dissolved if it fails to pay its annual registration fee on or before the last day of the third month immediately following the annual registration due date. Additionally, if a registered agent resigns and the LLC fails to file the statement of change on or before the last day of the second month immediately following the month in which the cancellation notice was mailed, the LLC will automatically be canceled. (3) The State Corporation Commission has discretion to cancel the existence of an LLC in cases where the LLC has been shown to have exceeded or abused its authority, failed to maintain a registered office or agent, failed to file any document required, or violated 8 U.S.C. § 1324a (f) which constitutes a pattern of employing unauthorized aliens. The Commission, however, will give the LLC notice of such a ruling in order to give the LLC an opportunity to be heard and show cause for the Order of Dissolution to be entered.

In cases where involuntary dissolution is enforced. The properties and affairs of the LLC shall pass automatically to its managers who are charged with collecting LLC assets, taking care of any obligations (debts), and do all other acts required to liquidate the business. The remainder of assets are then distributed to members or interest holders.

The circumstances of LLC dissolution are as unique as the start-up of a business. Disputes surrounding LLC dissolution can have the same sort of emotional intensity as a divorce or family litigation. Unfortunately, the members don’t always act rationally or in the best interests of the business. Navigating the red tape of dissolution can be more time consuming and daunting than beginning an LLC as liquidation, tax preparation, and cancellation of permits must be done in a timely manner. Contact our office for assistance in dissolving an LLC.

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