Dissolving a Louisiana LLC: Affidavit vs. Articles of Dissolution

When a Louisiana limited liability company is no longer operating, simply stopping business activity is not the same thing as formally dissolving the LLC. Louisiana law provides more than one way to dissolve an LLC, and choosing the right method can affect the filing process, the company’s obligations, and the potential liability of its members.

For many inactive LLCs, the simplest option is dissolution by affidavit. But that shortcut is available only when the company meets specific requirements. If the LLC has debts, assets, or other matters that must be addressed, the more traditional dissolution process using Articles of Dissolution may be appropriate.

Here is the difference between the two approaches.

Dissolution by Affidavit

Louisiana law provides a simplified dissolution procedure for an LLC that has ceased doing business, owes no debts, has no assets, and owns no immovable property. Under La. R.S. § 12:1335.1, the members can execute and file an affidavit with the Louisiana Secretary of State stating that these requirements have been satisfied.

This option can be appropriate for a small, inactive LLC whose affairs have already been completely settled. If the statutory requirements are satisfied, the affidavit procedure can provide a relatively straightforward way to formally dissolve the company.

However, it is important to understand that the affidavit procedure carries a significant consequence: the statute provides that the members may become personally liable for debts or claims against the LLC in proportion to their ownership interests.

Thus, a company should not use the affidavit procedure merely because it is no longer operating. The company must also satisfy the statutory requirements concerning debts, immovable property and other assets, which make the representations in the affidavit particularly important.

Dissolution by Articles of Dissolution

If an LLC has debts, assets, real estate, or other business matters that need to be resolved, or if the state of such matters is unknown, the traditional Articles of Dissolution process is generally more appropriate. La. R.S. § 12:1334 provides that, subject to the LLC’s articles of organization or written operating agreement, an LLC is dissolved when specified dissolution events occur or when its members authorize dissolution in accordance with the statute.

This process involves formally dissolving the LLC and “winding up” its affairs. Depending on the circumstances, winding up may include paying creditors, collecting amounts owed to the LLC, disposing of assets, resolving contracts, negotiating settlements and balance reductions, and distributing any remaining property to the members.

Once the LLC’s affairs have been properly wound up, the required filings can be made with the Secretary of State to complete the dissolution process.

What About the LLC’s Assets and Creditors?

This is one of the most important practical distinctions.

Dissolution does not necessarily mean that an LLC’s affairs are immediately finished. Under Louisiana law, after dissolution, the LLC’s affairs may need to be wound up. The winding-up process can involve identifying and paying creditors, collecting amounts owed to the LLC, disposing of property, and distributing remaining assets.

Louisiana law also provides a procedure for filing a certificate after the LLC has been completely liquidated. Once the required certificate is filed and the applicable fees, taxes, contributions, penalties, and interest have been addressed, the Secretary of State can issue a certificate of dissolution.

This is why the affidavit procedure should not be viewed simply as a cheaper or faster version of the traditional dissolution process. It is a specialized procedure for a company that meets the statutory prerequisites.

Other Business Obligations

Regardless of the dissolution procedure selected, business owners must still consider the company’s remaining tax, contractual, licensing, employment, and other obligations. Dissolving the LLC with the Secretary of State does not necessarily resolve every obligation the business may have with other governmental agencies, creditors, vendors, employees, or taxing authorities. For that reason, LLC members should consider the company’s complete financial and legal status when selecting a dissolution procedure.

The Bottom Line

If your Louisiana LLC is completely inactive, has no debts or potential liabilities, and owns no immovable property, dissolution by affidavit may be the simplest option.

However, if the LLC has outstanding obligations, assets, real estate, potential liabilities or other matters to address, the Articles of Dissolution and winding-up process may be more appropriate.

Choosing the correct procedure is important because dissolution does not automatically eliminate the LLC’s outstanding obligations or potential liability. Before filing, LLC owners should consult with legal counsel and tax professionals to review the company’s financial and legal affairs and determine which dissolution procedure best fits their circumstances.