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What If I Started an LLC But Never Did Anything With It?

Max Smith

Reading Time: 6 minutes

When you start a business, you might have a plan but plans change. Somehow, you started an LLC but never did anything with it. Now you’re thinking about what could happen.

It will give you nothing but cost. You may need to pay fees and complete the formal process to disclose your LLC. Otherwise, you can start operating your LLC after filling out the late fees and penalties of the state requirements.

In this article, you will understand deeply what you can do with your inactive LLC and the outcomes. So, let’s start!

Do you have an LLC with no business purpose? You can start operating the business at any time. But it’s a loss for you if you do nothing with your LLC.

According to state and federal laws, an LLC has a living identity until it is dissolved. So, you must pay the fees, penalties, and taxes. 

Below, let’s look at a few major and common incidents when you have an LLC but do nothing with it.

State Requirements

Though your LLC has no income, it has expenses to bear. There are ongoing requirements in every state for LLCs. The conditions may differ slightly in every state. 

But your LLC must pay annual fees, penalties, and reports. If you do nothing with your LLC and fall short of meeting the requirements, there are penalties or fines. So, without income, your LLC will have to pay non-compliance penalties.

Tax Complications

You may consider not paying any tax as your LLC has no income. Unfortunately, things do not go this way. Whether you have income or not, as long as your LLC is registered as a legal entity, it will pay taxes. If you do not pay, you must pay the taxes with penalties.

Legal Standing Problem

If your LLC is inactive for a long time, it may lose legal standing in the state. As a result, you may not get the chance to enjoy limited liability by opening a business account or entering into a new contract.

Unlimited liability

LLC provides limited liability benefits. But when your LLC is inactive for a long time, it may harm your assets. You may pay the business debts using your assets. It’s one of the biggest disadvantages of doing nothing with an LLC.

Dissolution

It’s the ultimate result of doing nothing with your LLC. When state officials notice no activity in your LLC, they will dissolve it. But you may pay the penalties and fees before dissolving an LLC. 

If you apply for dissolution without delay, you may escape extra charges and fines. Lastly, do you know how to dissolve an LLC?

How to Dissolve an LLC That Was Never Used

LLC Dissolution in a Nutshell

The steps for dissolving an LLC are almost the same in all states. However, dissolution fees vary by state, just like LLC registration fees. Click here to read the article on registration fee variations by state.

There is also a slight difference in dissolving different types of LLCs. Here are some basic but major steps to follow while dissolving an LLC.

  • Vote

Do you have a multimember LLC or corporation? Then you must hold a meeting among other members. In the case of a corporation, all the shareholders must give their vote on the topic of dissolution. 

In the meeting, members will vote for the dissolution of the LLC. If it happens, then you can begin the process of filing “Articles of Dissolution.

  • Submit Articles of Dissolution

Remember where you applied for the registration? You may apply to the same authority, state officials, or any responsible agency for the LLC dissolution. Once the authority approves your request, they will give you a “Certificate of Dissolution” or “Certificate of Cancellation.”

First, download the form from your secretary of state’s official website. Second, you may fill out the form with original information. You may need to enter your members and LLC details, liabilities to pay, asset distribution, etc. 

Thirdly, pay the associated fees. Lastly, submit the form and wait for the certification. In the meantime, you can pay the tax returns!

  • Last Tax Return

In a few states, paying the last tax return before the dissolution application is compulsory.

You must file a final tax return at both the federal and state levels. Plus, you may also file final employee tax returns.

While you are filing for the final tax return, please mention the final tax return in the documents. So the authority will understand and provide you with a tax clearance certificate. It will be officially confirmed that you have no liability for more taxes. 

Lastly, whether it’s taxes or bills, clearance is really important.

  • Pay the Outstanding Bills

Your LLC may have some outstanding bills. For instance, rent, utility bills, and more. In that case, you must pay attention to it and pay all the bills to secure your assets.

  • Clear the Debts and Distribute the Assets

After dissolution, if your LLC remains in debt, who will pay it? The members!!! 

It puts your assets at higher risk. So, paying off all the obligations to the third party before dissolution is better. 

Furthermore, what about the assets of an LLC? Distribute them to the respected members. Lastly, you can sell the LLC’s assets to repay its debts.

  • Cancel Any License or EIN.

Notify the agencies and cancel your licenses. It will help you avoid any trouble or late renewal fees. Plus, you may also need to cancel your EIN.

Contact the IRS to cancel your EIN. You may need to write a letter to cancel your EIN. it includes

  • LLC name,
  • EIN,
  • LLC address, &
  • Reasons for closing the EIN.

Now, send the EIN assignment copy and the letter to the IRS officials.

  • Cancel Registrations in Other States

If your LLC is registered in other states, please inform them to cancel it.

  • Notify Creditors

Inform your LLC creditors that your LLC is dissolving. So they would come and take their payments.

  • Keep the Records

At least for the next 2–5 years, keep all the records safe. It will help you avoid trouble or get refunds. Though dissolution may cost you, doing it will provide you with official documents to keep.

How Much Does It Cost to Dissolve an LLC?

There are LLC dissolution fees to pay. It’s not the same in every state. But it will cost you around $25–$100 on average. There are also other fees.

For instance, there are $125 expedited fees in Nevada. Plus, there is a $9 cost for every additional page in Delaware.

Moreover, if you take the help of a service provider, you can also count on their fees for disposal.

Let’s take a look at a few state dissolution filing fees.

State Name

Dissolution Filing Fees

Nevada

$100

Delaware

$204

Texas

$40

Alaska

$25

Alabama

$100

Arkansas

$50

What Happens When You Dissolve an LLC?

It’s the official end of your LLC. Since you started an LLC, it has its own legal identity. You had the opportunity to start a new business and enjoy benefits. But when you want to end it, you need dissolution.
LLC is created officially, and you must end it officially, too. That is why dissolution is the way to end its rights to operate or do any activity in the future.

There will be no state requirements, fees, penalties, taxes, liability, or anything else. Lastly, you can begin a new LLC.

Conclusion

Though you registered an LLC but never did anything with it, your LLC has legal status. So, you need an expert service provider to complete all the paperwork to officially dissolve it.

Plus, an expert will guide you on how to do it safely and quickly. Then you can start something better and bigger!

Frequently Asked Questions

How long can an LLC be inactive?

An LLC can remain inactive for 12 months. As your LLC is idle, it has no assets to pay annual fees, penalties, or reports. So, you will receive a government notice, and your LLC will be dissolved.

Do I need to dissolve my LLC if I never used it?

Yes! Whether you use your LLC or not, your LLC will receive notices to pay penalties, fees, interest, and more. Once you apply for dissolution and receive a dissolved certificate from the state officials, you are free to pay anything, and your LLC will lose its active status.

What happens if I don't use my LLC anymore?

It will cost you more if you don’t use your LLC anymore. It may cost you penalties, fees, taxes, and legal problems. In fact, your LLC must pay the creditors. If you have some contracts, you may need to continue and pay them as well. So, it’s better to dissolve your LLC if you have decided not to use it anymore.

Max Smith - LLC Formation

He is a seasoned entrepreneur and legal expert at LLC Formation Hub. With a stellar track record in both business and law, Max simplifies the complexities of LLCs. His practical insights, featured on LLC Formation Hub, empower entrepreneurs across the USA. Max merges business finesse with legal acuity to guide businesses toward success.


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