Nashua business owner has questions concerning an LLC trap for the unwary

An administrative dissolution by the NH Secretary of State (NH SOS).

Nashua business owner-Welts-White-FontaineA client of the firm who was operating a consulting LLC was hired by a local technology company as a full time employee. Her questions and concerns were how best to close up the business and wind up the affairs of the LLC. After congratulating her on her new job we discussed the basic rules of LLC dissolutions.

In many cases, an LLC (limited liability company) is dissolved and its business and internal affairs is wound up as provided in the company operating agreement or by majority vote of the members of the LLC (in writing), or by a court decree. Another form of dissolution, which is the focus of this blog, is the so-called administrative dissolution under RSA 304-C: 136.

“Winding up” a business is a term of art which means the process of concluding it existing business activities and all other activities in which it is engaged; concluding its internal affairs; and preparing for its liquidation (i.e. the sale or transfer of the business assets, or of the proceeds received by the business from the sale of those assets) to its creditors and then to its members.
The NH SOS may administratively dissolve an LLC, among other reasons, if it has failed to timely pay its annual report fees (or fails to deliver it annual report) to the NH SOS. Many LLC members are under the impression that it is recommended to simply not pay their annual report fees and accept an administrative dissolution in all cases. This is not the case!

My general rule of thumb is that if the LLC has no assets or liabilities, let it dissolve administratively by not filing and paying the annual report for two consecutive years. If the LLC has assets or liabilities, file a certificate of cancellation, and obtain a certificate of dissolution by the DRA. In such a case, the LLC should send out claim letters to known claimants and publish notice in a newspaper in order to cut off rights of unknown claimants.

Dissolving and winding up and LLC can be a complicated process with many traps for the unwary member or manager. In most cases, an attorney with experience in handling LLC matters should be consulted to guide the business through the process.
At Welts, White & Fontaine, P.C. our lawyers have experience representing owners of closely held businesses. We can help you develop strategies for a successful navigation of New Hampshire’s business planning and succession landscape. Please contact Attorney John Polgrean if you have questions or concerns about your business planning endeavors. (603) 883-0797.

Author: Attorney John Polgrean

This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal