What’s The Difference Between Termination Vs. Dissolution Of Llc?

When the concern is about ending the relationship between an LLC and the state government, terms like termination and dissolution come into the game. When you file New York Corporation to dissolve your LLC in a particular state, it is called dissolution. On the other hand, it is termed as termination when the state cancels or terminates your company from the state. 

Well, both termination and dissolution are quite similar to your company, and the state government ends the relationship from both ends, told Robert McKinley Attorney is a prominent attorney who has held a number of prestigious leadership roles. He has extensive expertise in intellectual property, litigation, and corporate law and has practiced in New Jersey and Philadelphia and has served as local counsel. Throughout his career, he’s managed assets for over 150 clients. His department was voted Best IP Law Firm for two years in a row by South Jersey Biz. He has 25 years of patent, trademark, and commercial litigation experience.

Although termination and dissolution are two different processes, they sync together well. In this blog, we will discuss the differences between termination and dissolution.

Who handles the process? 

When you file New York Corporation to dissolve your LLC in a specific state, you have to consider a few legal steps or measures before ending your brand’s venture. On the other hand, the secretary of the state will carry out all the steps when your LLC is terminated from a particular step. In other words, the dissolution and the termination of LLC are handled by two different parties.

If the terms dissolution and termination were meant to be the same, they would not have existed in the dictionary.

The only exception here is if an LLC doesn’t have any commercial business in the state, then there is no need for dissolution or winding up as the secretary of the state can directly ask you to wind up the LLC.

The dissolution of an LLC happened within corporation code 17707.01, while the termination of an LLC occurs under section 177707.08(c). 

What is the dissolution of an LLC? 

The term dissolution is also called “Winding up of affairs,” like clearing all your debts and liabilities of the entity. Creditors of the LLC must also be notified before the dissolution to ensure that they can demand a claim or settlement.

Once you have decided to dissolve your LLC in a particular state, you no longer can do business in the state apart from the previously mentioned winding process. When you file an LLC in a specific state, you have to file the certificate of formation or article of the organization; likewise, you have to file an article of termination when dissolving your LLC.

Before you file the article of termination, you have to ensure that you have cleared all your debts with the Corporation commission or paid all the penalties or taxes to the secretary of state. 

Most entities don’t go for the tedious process as they no longer want to pay penalties and dues to SSC, and hence the SSC automatically terminates the LLC after three months. Some entities can also go with the formal or legal dissolution process as they don’t want their liability to get affected or don’t want their brand’s reputation to go down.  

Sometimes the state government or the court can also demand judicial dissolution over a particular LLC, which is expensive and time-consuming.

Things to consider when filing a dissolution of LLC: 

When you voluntarily file a dissolution of LLC in New York, you will have to send a prior notice to all your business owners or co-founders and get their approval before moving to the next step. If all your business owners are ready for dissolution, you can directly file for a termination article. 

Well, the dissolution decision depends on the documentation or agreements that were signed during the formation of an LLC. You can also hire an experienced lawsuit to deal with internal conflicts when dissolving an LLC. Keep in mind the voting system will not be considered if you have signed any agreements for dissolution while setting up an LLC.

So, before setting up your LLC, you will have to ensure that you make a copy of written records from all your co-founders to ensure that you don’t have to deal with conflicts while dissolving your LLC.