Massachusetts Business Attorney · Business Law
Closing a Massachusetts LLC takes more than a $100 filing with the state. Under the Massachusetts LLC Act, ending an LLC happens in three stages: the company dissolves, it winds up its affairs, and only then does it file a certificate of cancellation to end its legal existence. Skipping a stage, or doing them out of order, is how owners end up with surprise debts, tax notices or lawsuits after they thought the business was gone.
Here is how the process works, step by step.
Step 1: Decide to dissolve, the right way
An LLC dissolves at a time or on an event set out in its operating agreement, by written consent of all the members, or by court order (§ 43). Start with your operating agreement. It may set a different vote, a buy-out right, or a required procedure. If you don’t have a written agreement, plan on getting every member’s written consent. Our guide to the Massachusetts LLC operating agreement explains why those terms matter.
Put the decision in writing, signed by the members, and keep it with the company records.
Step 2: Wind up the business
Dissolution doesn’t end the company. A dissolved LLC continues to exist so it can wind up (§ 45). A manager who did not wrongfully cause the dissolution handles this or, if there is none, the members or someone they approve. A court can also appoint a liquidating trustee. Winding up means:
- Finishing or settling open contracts and projects
- Collecting what the company is owed
- Selling or distributing company property
- Prosecuting or defending any lawsuits
- Paying, or making reasonable provision for, the company’s debts
During winding up, the company should take on no new business beyond what is needed to close.
Step 3: Pay creditors before members
Massachusetts law sets the order in which a dissolved LLC distributes what it has left (§ 46):
- Creditors first, including members or managers who lent the company money.
- Then any distributions already owed to members or former members.
- Then members, first to return their contributions and then according to their share of distributions.
Paying the members before the creditors invites claims against the people who received the money. If the company can’t pay everyone in full, get advice before distributing anything.
Step 4: Handle employees and taxes
- Final wages. Massachusetts generally requires employees who are let go to be paid in full on their last day, including earned vacation pay (G.L. c. 149, § 148).
- Final returns. File the company’s final federal and Massachusetts returns and payroll filings. The IRS has a checklist for closing a business.
- Close tax accounts. Close sales tax, withholding and other accounts in MassTaxConnect, and the company’s unemployment insurance account, once the final returns are filed.
The tax information above is general information, not tax advice. Talk with an accountant or tax advisor about your company’s final returns.
Step 5: File the Certificate of Cancellation
Once winding up is complete, the LLC files a certificate of cancellation with the Secretary of the Commonwealth’s Corporations Division (§ 14). The filing fee is $100. The certificate states the LLC’s name, its federal employer identification number, the date its certificate of organization was filed, and the reason for cancellation. It takes effect when filed unless it names a later date.
One requirement catches many owners: before the certificate can be filed, the LLC must file every annual report and pay every fee it owes the state. If you let annual reports lapse, budget for catching up.
Step 6: Close out everything else
- Close the company’s bank accounts after the last checks clear
- Cancel licenses, permits and any business certificate (d/b/a) filed with your city or town
- End or assign leases, contracts and subscriptions
- Notify customers, vendors and your insurance carrier, and ask whether you need “tail” coverage for claims made after closing
- Keep the company’s records, especially tax and employment records, for several years
What if you just stop filing annual reports?
Some owners simply walk away and let the state dissolve the LLC. The Secretary of the Commonwealth can administratively dissolve an LLC that fails to file annual reports for two consecutive years, after a 90-day notice (§ 70). An administratively dissolved LLC still exists, but only to wind up its affairs. It can apply for reinstatement at any time once the problem is fixed (§ 71).
Walking away is not a shortcut. The debts, tax filings and wind-up duties don’t disappear, and nothing has been done to settle them in the right order. A planned dissolution is cleaner and usually cheaper.
Closing a corporation instead?
Corporations follow a different statute and file articles of dissolution rather than a certificate of cancellation. See how to close the doors, or dissolve a company for corporations, and our checklist for closing a Massachusetts business for steps that apply to any business.
Getting help dissolving your LLC
Dissolving an LLC correctly protects the owners from claims that surface after the doors close. Learn more about winding up a Massachusetts business and our Massachusetts business law services, or contact our office to talk through closing your company.
About the Author
Richard Alan Gaudet, Esq. is a Massachusetts attorney at the Law Offices of Richard Alan Gaudet, LLC in Middleton, Massachusetts, who advises business owners on forming, operating and closing LLCs and corporations. His practice focuses on professional license defense, business law and litigation, family law, and landlord representation, serving clients across Northern, Eastern, and Central Massachusetts. Reach him at 978-273-8337 or rgaudet@gaudetlawoffice.com. Office: 35 Village Rd., Ste 100, Middleton, MA 01949.
ABOUT THIS ARTICLE
This article was prepared by a Massachusetts attorney and is provided solely for general informational and educational purposes directed to members of the general public. It does not constitute legal advice and does not create an attorney-client relationship. The law applicable to any particular situation depends on the specific facts and circumstances of that matter. Readers are encouraged to seek the advice of a licensed Massachusetts attorney before taking any action.
