Should You Dissociate From Your LLC?

There are several ways to establish a business entity in the United States of America. Each route is unique and contains its benefits and its drawbacks. For many, forming a limited liability company is appealing for several reasons. Over time, however, this type of business may no longer suit the needs or desires of an individual. There are good reasons to join or stay in a limited liability company, but also some good reasons to leave. The following is some useful information about LLCs that may aid your decision in remaining in an LLC or dissociating from it.

Reasons to form an LLC revolve around the key words ‘limited liability.’ Personal liability is greatly reduced. By making the company its own business entity, the owner is absolved from having their assets or debts connected to the company. LLCs also do not require as many yearly meetings and the incredibly meticulous paperwork that other types of corporations do.

Taxes, the way profits are distributed, as well as owner and management flexibilities are all reasons to consider an LLC. LLC taxes are supposed to be paid through an individual's income, which is a convenient way to avoid some heavy taxes. Unlike corporations, LLCs can have more than 100 shareholders, and profits can be decided upon by the LLC’s constituents.

While an LLC may sound like the ideal company structure, situations arise in which poor planning can drive an owner away. Reasons to leave and LLC include, but are certainly not limited to, poor management, bankruptcy, low profits, or frequent partner disagreements.

Poor management can cause problems within the company, which result in low profits. Low profits means poor overall investment if one finds themselves investing more than earning. Anytime low funds are involved, it can be an incentive to leave, especially if management is poor and there are frequent disputes taking away from the experience.

Leaving an LLC is no simple decision, but it is the next step toward new business opportunities. First, it is important to discuss dissolution and dissociation with your business partners. Going over the partnership agreements and reviewing how to dissolve the company according to the agreements is important to a successful exit from that LLC.

Then it is important to file a dissolution form in accordance with the state, and from there it is important to also notify any important connected parties of the dissolution. These parties include employees, customers, the government, and the IRS. Paying off all debts and being thorough in closing accounts is the final step before you can go about your new ventures in life.

Experienced attorneys can help you navigate this complex process and can advise you in taking the best course of action.

It is understandable to be on the fence regarding remaining in an LLC or leaving it. Perhaps tax incentives drove you toward forming an LLCs but you would much rather be a sole proprietor. Whatever the reason may be, it is understandable to contemplate your departure if you are not fully pleased with inner-workings or profitability of the business. If you are unsure which direction to take, our staff can help you sort out the details. At SAC Attorneys LLP, we strive to find solutions for your business so that you do not have to stress. For any questions you may have regarding leaving an LLC, or general advice, please do not hesitate to contact our team at (408) 716-1790 today.