• Joel Ankney - Lawyer

What Do I Do If My LLC is Terminated?

Updated: May 17


Virginia will automatically terminate your LLC if you don't pay your annual registration fee. You can reinstate your LLC by filing a form and paying the unpaid registration fees and penalties. When your LLC is reinstated, it's as if it were never terminated - i.e., there is no gap in its existence. That's the easy answer.


But reinstatement is available only during the 5-year period after your LLC has been terminated. What do you do if you're past the 5-year period? You can't reinstate.


When an LLC is terminated, title to its assets automatically transfer to its managers (if there are any) or its members as trustees in liquidation. The members are supposed to stop operating the business, liquidate its assets, pay its debts, and wind up its affairs. But, if the members are unaware that the LLC has been terminated and continue to operate the LLC past the 5-year reinstatement period, they probably are operating as a sole proprietorship (if there is just one member) or a general partnership (if there are two or more members). That's a lot of potential personal liability exposure to take on unknowingly, and operating as an LLC after termination (other than for winding up) is a breach of Virginia law.


Start a new LLC as soon as possible. You probably can name the new LLC with the same name as your terminated LLC, unless someone started an LLC or corporation with that name after your LLC was terminated. The Operating Agreement for the new LLC should describe what happened and why you started the new LLC. It also should have the same members as the terminated LLC. The Operating Agreement should clearly indicate that the members are transferring title to the terminated LLC's assets into the new LLC in exchange for their membership interests (that's each member's initial capital contribution).


This isn't a perfect fix because a gap will still exist between the termination of your original LLC and the start of your new LLC. You might be personally liable for business obligations during that gap period. But starting a new LLC in this way gets you back on track, protects your personal assets going forward, gets title to the business assets out of the hands of the members and back into an LLC, and keeps you in compliance with Virginia law.

ANKNEY LAW

249 Central Park Ave., Ste. 300-43

Virginia Beach, VA 23462

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