Liquidating a limited company

Both insolvent and solvent companies can be liquidated.

For an insolvent company, this can be done via a creditors’ voluntary liquidation or a compulsory liquidation.

Whether the vote takes place with a show of hands or in a written format, the event should be documented in meeting minutes and made part of permanent LLC records.

Contact the secretary of state's office for your state and ask for the necessary termination forms.

While the information an LLC needs to provide may differ by state, most require at least the name of the LLC and its members, the filing date, the date the dissolution will be in effect, the reason for making the decision to dissolve and information concerning pending legal actions or unpaid taxes.

This can happen for reasons of retirement, intractable shareholder dispute, or simply because the limited company is no longer needed.

The main advantage of the solvent liquidation procedure is that distributions made in the liquidation count as capital receipts in the hands of the shareholders rather than income, and are subject to capital gains tax rather than income tax.

This is likely to be beneficial if Entrepreneur's Relief is available for liquidations of trading companies Although MVLs are for solvent companies, the process is in many ways similar to handling an insolvent liquidation, for this reason, only a Licensed Insolvency Practitioner can legally be appointed Liquidator in an MVL.

The process can be done informally too, without the expense of a liquidation, subject to certain conditions, which is explained also. it can afford to pay all its creditors so that there is something left over for the shareholders.

If the company is insolvent, it must be dealt with by another type of insolvency procedure, whether administration, receivership, voluntary arrangement, creditors' voluntary liquidation or compulsory liquidation.

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