The following is from my friend, Lisa Thompson, an excellent bankruptcy attorney.
LLCs have the option to voluntarily dissolve and go through the legal procedure for resolving or removing claims.
Chapter 7, Arizona Limited Liability Company Act
A.R.S. 29-3701 Events causing Dissolution of an LLC:
- The LLC must give notice (plus a copy of the law (optional, but good practice)) to all known creditors in accordance with the law and file a Notice of Winding Up with the ACC.
- The known creditors have 120 days to submit claims to the LLC (or LLC counsel, which can be anyone).
- A claim made during the winding-up procedure can be rejected (statute states no grounds for doing so).
- The claimant only has 90 days after a claim is denied to file an action to enforce the claim. After that, the action is forever barred.
- Claims that are not filed in a timely manner are ineligible.
- This usually excludes a lot of claims because creditors frequently ignore explicit instructions.
- The LLC should gather any assets during the 120-day term, and at the end of the 120-day period, any cash should be paid proportionately to individuals who filed claims.
Notes: Termination and dissolution are different concepts. An LLC cannot be reinstated after it has been terminated. A dissolution is simply winding down and is revocable.
- This process may help you gauge how strongly creditors may object. If some creditors are aggressive, then consider filing for Chapter 7 bankruptcy and giving the funds to the trustee to handle.
- The costs associated with hiring an attorney or accountant throughout the winding-up process should be paid before creditors’ claims.
- The LLC should terminate only once all the funds are distributed.
- The person filing the Articles of Termination must attest that “All known properties and assets of the limited liability company have been applied and divided in conformity with A.R.S. Title 29, Chapter 7.”
FORMS and LINKS:
Dissolution_of_LLCs_-_2023.rtf
App_6-14_Notice_of_WInding_Up.pdf
App_6-15_Articles_of_Termination.pdf
29-3702_Winding_up.pdf
29-3704_Known_claims_against_dissolved_limited_liability_company.pdf
29-3705_Other_claims_against_dissolved_limited_liability_company.pdf
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