Dissolution of Operating Agreement

Dissolution of Operating Agreement: What it is and how to handle it

If you run a limited liability company (LLC), you are probably familiar with the concept of an Operating Agreement. This document outlines the structure and processes of the company, including the roles and responsibilities of its members. However, what happens when the company members decide to part ways? This is where the dissolution of the operating agreement comes into play.

What is Dissolution of Operating Agreement?

Dissolution of Operating Agreement refers to the process of legally ending an LLC. It involves the termination of the company`s existence, liabilities, and obligations. This usually happens when the members decide to dissolve the company voluntarily or when the company fails to meet its legal requirements.

Dissolving the company means that the LLC will no longer continue its operations, but it does not always mean that the company will be liquidated. The members may choose to distribute assets and settle obligations before finalizing the dissolution process.

How to Dissolve an Operating Agreement

The process of dissolving an Operating Agreement varies depending on the state where the LLC is registered. However, there are general steps that members can follow to ensure a smooth dissolution process.

1. Review the Operating Agreement

The first step is to review the Operating Agreement to determine the required procedures for dissolution. Some agreements may require a unanimous vote from the members, while others may only need a majority vote. The agreement may also outline the process for distributing assets and settling liabilities.

2. Notify the Appropriate Authorities

The next step is to notify the appropriate authorities, including the state where the LLC is registered and any other relevant agencies. This process may involve filing dissolution documents and paying fees.

3. Settle Debts and Obligations

Before finalizing the dissolution, the members must settle any outstanding debts, taxes, and obligations. This may involve paying creditors, employees, and legal fees. Members should also ensure that all contracts are terminated or transferred to another entity, if necessary.

4. Distribute Remaining Assets

If there are any remaining assets after settling obligations, the members must distribute them according to the Operating Agreement. This may involve distributing profits or assets to the members or transferring them to another entity.

5. File the Final Tax Return

Finally, the members must file a final tax return for the LLC. This will ensure that the company`s tax obligations are met and any tax refunds are received.


Dissolving an Operating Agreement can be a complex process, but it is necessary when LLC members decide to part ways. By following the required procedures and settling all obligations, members can ensure a smooth and legal dissolution process. If you are considering dissolving your LLC, it is recommended to consult with legal counsel to ensure that all legal requirements are met.