To dissolve an LLC in Alabama, you need a triggering event or a unanimous member vote, then you file Articles of Dissolution with the Alabama Secretary of State with a $100 fee, wind up the company’s affairs by notifying creditors and paying debts, settle any outstanding Alabama business privilege tax, and file final federal tax returns with the IRS. Skipping any of these steps can leave you personally exposed to lingering debts or leave the state charging business privilege tax year after year on an LLC you thought was closed.
Trigger the Dissolution
Alabama law recognizes four ways an LLC dissolves. The first is an event written into the operating agreement itself. If the agreement says the LLC ends when a founding member leaves or when a specific project wraps up, that provision controls automatically.
The second is consent of all members. Every member must agree; a simple majority is not enough under the default statute. This unanimous-consent rule can catch owners off guard when one member refuses to cooperate, which is why many operating agreements lower the threshold to a supermajority or a simple majority.
The third is the departure of every member. When no members remain, the LLC dissolves by operation of law unless, within 90 days, all holders of transferable interests agree in writing to keep the LLC going and appoint at least one new member, or the operating agreement already contains a procedure for appointing replacements. That 90-day clock starts the moment the last member dissociates.1Alabama Legislature. Alabama Code 10A-5A-7.01 – Events of Dissolution
The fourth is a court order. When members are deadlocked or the LLC has gone so far off track that it can no longer operate under its own agreement, any member can petition the circuit court in the county where the LLC’s principal or registered office sits. Courts don’t grant these petitions lightly; the member has to show good cause, which usually means demonstrating that the LLC’s operations have become impracticable under the terms of the operating agreement.2Alabama Legislature. Alabama Code 10A-5A-7.03 – Right to Wind Up Activities and Affairs
File Articles of Dissolution With the Secretary of State
Once a dissolution event has occurred, file Articles of Dissolution with the Alabama Secretary of State. This is the step that makes the dissolution official on the state’s records. The filing fee is $100, payable by check, money order, or credit card. Credit card payments carry a convenience fee of 3% of the total charge plus $2.00.3Alabama Secretary of State. Domestic LLC Dissolution
The form must be typed and submitted by mail or courier to the Secretary of State’s Business Services office in Montgomery. Email submissions are not accepted. Send two copies of the completed form and include a self-addressed, stamped envelope if you want a receipt back. If your check bounces or your card is declined, the filing gets pulled from the index and you’ll owe an additional $30 dishonored-check fee.3Alabama Secretary of State. Domestic LLC Dissolution
Filing the Articles does not end the LLC’s existence right away. The LLC continues to exist as a legal entity during the winding-up period, but it can no longer conduct regular business. Its only purpose from that point forward is to settle its affairs.
Wind Up the Business and Handle Creditor Claims
Winding up converts the LLC from an operating business into a closed one. The LLC stops taking on new work and focuses on collecting what it’s owed, selling assets, paying debts, and distributing whatever remains to members. If the operating agreement names someone to handle winding up, that person takes charge. Otherwise, the remaining members handle it.2Alabama Legislature. Alabama Code 10A-5A-7.03 – Right to Wind Up Activities and Affairs
Whoever manages the winding up has fiduciary duties to handle assets properly and pay creditors before distributing anything to members. Splitting the bank account among members before debts are paid is one of the fastest ways to create personal liability problems.
Known Creditors
For creditors the LLC is already aware of, the statute requires direct written notice describing how to submit a claim and giving a deadline. Claims that aren’t submitted within the stated deadline can be barred, giving the LLC a clean cutoff.4Alabama Legislature. Alabama Code 10A-5A-7.05 – Other Claims Against Dissolved Limited Liability Company
Unknown or Contingent Creditors
For creditors the LLC doesn’t know about, or for claims that haven’t matured yet, publish a notice in a newspaper of general circulation in the county where the principal office sits. If no principal office exists in Alabama, run the notice in the county of the most recent registered office. The notice must describe what information a claim needs to include, provide a mailing address, and state that claims will be barred unless the creditor files a lawsuit within two years of the publication date.4Alabama Legislature. Alabama Code 10A-5A-7.05 – Other Claims Against Dissolved Limited Liability Company
Publishing that notice is optional but strongly advisable. Without it, the two-year claims bar doesn’t run, and the door stays open for claims long after members have divided the LLC’s remaining assets.
Clear the Alabama Business Privilege Tax
Alabama’s business privilege tax keeps accruing every year as long as the LLC legally exists, whether or not it’s actually operating. If you shut the doors in 2024 but don’t file Articles of Dissolution until 2027, you owe business privilege tax for every year in between. The Alabama Department of Revenue can assess estimated taxes, late-filing penalties, late-payment penalties, and interest for each year the LLC remained legally active without filing.5Alabama Department of Revenue. How to Close a Business for Business Privilege Tax Purposes
Before dissolution is complete, any delinquent tax or accrued liability owed to the Department of Revenue must be paid. Filing Articles of Dissolution alone does not clear back taxes; those debts have to be resolved separately.5Alabama Department of Revenue. How to Close a Business for Business Privilege Tax Purposes
File Your Final Federal Tax Returns
The IRS operates separately from the state. Your final federal filings depend on how the LLC is classified for tax purposes.
- Multi-member LLCs taxed as partnerships file Form 1065 for the final year, check the “final return” box near the top of the form, and check the “final K-1” box on each member’s Schedule K-1. Capital gains or losses from liquidating assets go on Schedule D.
- LLCs taxed as S corporations file Form 1120-S for the final year with the “final return” box checked and mark each Schedule K-1 as final.
- LLCs taxed as C corporations file Form 1120 for the final year with the “final return” box checked. They must also file Form 966 (Corporate Dissolution or Liquidation) if a formal resolution or plan to dissolve was adopted.
- Single-member LLCs treated as disregarded entities report the final year’s income and expenses on the owner’s personal Schedule C as usual.
If the LLC sold business property during winding up, Form 4797 (Sales of Business Property) may also apply. If the entire business was sold as a going concern, so does Form 8594 (Asset Acquisition Statement).6Internal Revenue Service. Closing a Business
One point that surprises owners: you cannot cancel an Employer Identification Number. Once the IRS issues an EIN, it’s permanent and will never be reassigned or reused. You can close the business account associated with the EIN by sending a letter to the IRS that includes the EIN, the business name, and the reason for closing, but the number itself stays tied to the entity forever.
Keep Records After the LLC Closes
Dissolution doesn’t end your recordkeeping obligations. The IRS can audit returns for three years after filing, and that window extends to six years if the IRS suspects a substantial error. Keeping business tax returns and supporting financial documents for at least seven years is a comfortable margin. Formation documents, operating agreements, meeting minutes, and ownership records should be kept permanently, because questions about the LLC’s structure or past transactions can surface long after it closes.
If You Change Your Mind: Reinstatement
Alabama allows reinstatement after dissolution. The consent requirements depend on the operating agreement. If the agreement addresses reinstatement, follow its consent procedure. If it addresses dissolution but not reinstatement, you need the same level of consent that would have been required to dissolve. If it’s silent on both, you need the consent level required for dissolution under Alabama’s default rules.
If any members petitioned a court to dissolve the LLC, those specific members must also consent to reinstatement. If anyone delivered a written objection to reinstatement before the consent vote, that objection must be withdrawn first. The final step is filing a certificate of reinstatement with the Secretary of State.7Alabama Legislature. Alabama Code 10A-5A-7.07 – Reinstatement
The statute imposes no specific deadline for reinstatement, but waiting complicates things. Unpaid business privilege taxes accumulate during the period the LLC was dissolved, creditor positions can shift, and third parties may have relied on the dissolution. If you want the LLC back, move quickly.