Do you own a business in Pennsylvania and want to close down due to debt or other reasons? If YES, here is a 8-step guide on how to dissolve an LLC in Pennsylvania. Dissolving a partnership is an official process of permanently closing your business cum partnership.
Even though filing the dissolution documentation with the state of Pennsylvania is certainly an important part of the process, it is not the only step. You are expected to also liquidate your business assets, settle any liabilities, and send legal notifications to anyone that had an interest in your company. You should note that failing to complete these steps might entail you being held liable for any outstanding debts or liabilities of your partnership business.
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Dissolving General Partnership Vs Limited Partnership
Please note that limited and general partnerships desiring to withdraw from Pennsylvania must obtain a clearance certificate from the PA Department of Revenue. Limited liability partnerships must obtain a clearance certificate from the PA Department of Revenue and Department of Labor and Industry.
General partnerships that are not required to withhold tax at the source (e.g. employer withholding and sales tax) are not required to obtain clearance certificates if they are merely ceasing to do business within Pennsylvania or selling their assets in a bulk or auction sale. A general partnership files the PA-20S/PA-65 Information Return and marks the final return oval.
However, limited partnerships or general partnerships that withhold at the source (e.g. employer withholding and sales tax) must obtain a tax clearance certificate before filing required documents with the Department of State.
To obtain a tax clearance certificate, the entity must file all state tax reports / returns and pay all taxes (including interest, penalties, fees, charges and other liabilities) due to Pennsylvania up to and including the date that all assets were liquidated and distributed to partners, or the date business operations ceased in Pennsylvania, whichever is later.
To obtain a Tax Clearance Certificate, the entity must complete form REV-181, Application for Tax Clearance Certificate.
4 Detailed Steps to Dissolve a Partnership in Pennsylvania
Have it in mind that a partnership (limited partnerships or general partnerships) in the state of Pennsylvania is both established and dissolved by filing articles of organization or dissolution, respectively, with the Secretary of State. If you are interested in dissolving a partnership (limited partnerships or general partnerships) voluntarily in Pennsylvania, here are steps to take.
1. Meeting of the Partners Involved
When looking to dissolve a partnership in Pennsylvania, the very first step is to consult the articles of organization and the operating agreement. Note that the dissolution is expected to comply with the terms of the articles of organization or the operating agreement. If dissolution is not covered in either of these documents, state law applies by default and a meeting of the partners is called.
Nonetheless, a resolution to dissolve the partnership must be adopted by the partners if a previous agreement wasn’t covered. The law in the state of Pennsylvania requires all partners to agree to the dissolution in writing if neither the articles of organization nor the operating agreement detail a method for dissolution.
2. Articles of Dissolution
Once all the partners have reached a consensus to dissolve the partnership by the method described in the articles of organization or the operating agreement or by unanimous consent, articles of dissolution must be filed with the Secretary of State.
Note that articles of dissolution tend to include the name of the partnership, the date of the filing of the articles of organization and any amendments, the legal basis for filing articles of dissolution (for example, written agreement by all of the partners), and the effective date of the dissolution of the partnership.
Also note that the Pennsylvania Secretary of State has an Articles of Dissolution form to download and execute. The filing fee for the articles of dissolution must be paid to be processed.
3. Winding Up the Partnership
This is simply the process of resolving the final matters of the partnership. After the partners vote to dissolve the partnership, it continues to exist to allow time for winding up the company. Usually, the partnership will designate one of the partners to handle the winding up. Under Pennsylvania’s partnership Act, key winding up tasks include:
- Collecting partnership assets
- Disposing of partnership property that will not be distributed in kind to members
- Discharging or making provision to discharge partnership liabilities; and
- Distributing any remaining assets to partnership partners.
However, when it comes to the last two listed items, discharging liabilities and making distributions to members, you are expected to make payments in a particular order. First, you must pay creditors, including partnership members who are creditors, to the extent permitted by law.
It is very crucial that you pay all outstanding taxes. After that, unless your formational documents provide otherwise, you should make distributions to current and former partners based, for example, on withdrawal from the company or on previous agreement of company managers.
Finally, note that any assets remaining is expected to be distributed amongst members based on the terms of your articles of organization or operating agreement, or else proportionally based on each member’s contributions to the company after adjustments.
4. Provide Notice of Dissolution
Note that a notice of the dissolution of the partnership must be provided to known creditors of the partnership. This notice is expected to state a claim of any money owed, supplies a mailing address where claims are to be sent, and provides a deadline at least 120 days from the date of the written notice.
The notice must also state that any claims not received by the deadline are barred pursuant to Pennsylvania law. In addition, the notice of dissolution of the partnership is expected to be published in a newspaper, along with the request that parties with a claim against the partnership make those claims in accordance with the notice.
Note that this notice must be published once in the county where the partnership’s primary office was located and it must in very extensive details explain how to make a claim and provide a mailing address where the claim is to be sent. The notice must also state that any claims made against the partnership will be barred unless brought within five years of the publication of the notice.
Whether you are dissolving a domestic or foreign partnership, the process is not complicated. You will simply need to file the form that corresponds to your business type.
However, note that taking the time to properly dissolve a partnership in Pennsylvania by having the correct agreements in place resolves any potential issues, including remaining property, and limits the ability of creditors to make claims against partners for debts of the partnership in the future.
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