A business owner in Louisiana who wishes to dissolve his or her non-operating LLC may run across information demonstrating how to dissolve the LLC with the Louisiana Secretary of State using an affidavit provided by the Secretary of State. Although this can be a valid method of dissolving an LLC, business owners should beware that dissolving the LLC via this method (also known as “short form dissolution”) may leave him or her open to future liability.
In the section authorizing this form of dissolution, Louisiana Revised Statute § 12:1335.1(A) provides in pertinent part that after dissolution of an LLC via affidavit with the Secretary of State:
the members, or the organizer if no membership interests have been issued, shall be personally liable for any debts or other claims against the limited liability company in proportion to their ownership interest in the company. (Emphasis added.)
It is important for business owners to understand the implications of dissolving an LLC via short form dissolution and to understand that this short form dissolution may leave them open to continued personal liability even after the business has been dissolved.
Business owners should not be dissuaded from dissolving their non-operating LLC, however, as leaving the non-operating business in “active” status can also represent continued liabilities and other issues. Instead, the business owner should consider long form dissolution, to achieve peace of mind. Long form dissolution which can be achieved by following the proper protocols set forth in Louisiana Revised Statute § 12:1338, which, if done properly, can provide the former business owner(s) with an added layer of protection by creating a three (3) year peremptive period after which time all claims which have not been already filed against the LLC already may be time barred “perpetually and peremptorily.”
To obtain the protections of this peremptive period, the business must first dissolve the LLC in accordance with Louisiana Revised Statute § 12:1334 by an authorized act of consent from the LLC performed in agreement with its formative documents (such as its operating agreement). The LLC must then “wind up” its business through winding up and liquidation and perform the requirements of Louisiana Revised Statute § 12:1338 which includes, among other things, the posting of two (2) separate legal notices in a local newspaper and the filing of certain documents with the Louisiana Secretary of State.
For more information on how to properly dissolve your LLC or other business form via long form in order to avoid personal liability, contact a trusted business lawyer for advice particular to your situation.