How to liquidate a company (LLC) with debts?

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Our company has been providing legal support for the termination of legal entities, including those with problem tax history, for many years.

But over the years of practice we have realized that many cases are similar and they can be divided into several types, based on which we offer our Clients the most convenient option to manage their situation.

Today we will talk about how to properly liquidate a company (LLC) with or without debts, depending on various factors.

Related article and video: Terms And Types Of The LLC Liquidation

What to do when the firm has submitted reports in good faith, has no debts and no reason to complete the process quickly?

Even the standard termination of a company by decision of its participants takes place in several stages.

The heaviest and the longest stage is a tax audit and re-registration of taxpayers. Due to the overload of inspectors, it can take months to get the tax audit scheduled. Although the tax audit itself takes 10 business days (or 15  business days for large taxpayers), there are no established deadlines for signing an audit completion checklist.

Along with the company’s liquidation at the tax authorities, the company shall pass an inspection and de-registration from the Social Insurance Funds.

And upon the de-registration from all state authorities, it is necessary to submit all documents related to the company’s business activities to the Public Record Office.

In our practice, we were faced with the situations when the process of closing a company took several years, in some cases - even more than three years.

Of course, each stage separately and all together can be accelerated, if you clearly know how to draw up reporting documents and how to properly submit them to the relevant authorities.

What to do if there are no debts, but you need to quickly terminate the company?

This is one of the most common cases.

The fastest procedure of de-registration from all state authorities, including the tax authorities, takes about six months.

Case: One day we were contacted by the management of a company founded by a Turkish company. It was important for them to liquidate the Ukrainian LLC as soon as possible, although the company had no debts.

Our company has undertaken to liquidate the company in Kyiv within six months. In such conditions we had to communicate with tax authorities not only every day, but several times a day.

It’s worth noting that during the tax audit, the chief accountant of the company communicated with the inspector. This accelerated the process, because no one can provide supporting documents or explanations as quickly as the person who has personally administered the company’s budget for many years.

Thus, in order to quickly liquidate the LLC, you need to ensure a coordinated work of qualified lawyers and an accountant, as well as specific knowledge of the process, which will help to significantly reduce the liquidation period.

Related article: Peculiarities Of The Legal Entity’s Dissolution By Its Owner’s Decision. Part 1

What to do if the company hasn’t been operating for several years and just hangs over the founders?

Unfortunately, sometimes the business doesn’t succeed and business activities haven’t been carried out for a long time, or even since the company establishment.

It’s good if you submitted at least zero balance reports in good faith. And if the company operated under the general taxation system, you don’t even need to submit zero balance reports.

In such cases, you won’t face any problems when passing the audit. But you will still need to wait for the tax audit to be scheduled. Therefore, it’s worth finding a person who will fully assume the functions of the liquidator and communicate with representatives of the state authorities.

Such services are also called “alternative liquidation”: the company’s owners fully entrust the procedure to the liquidators. Our lawyers can play the role of a liquidator and help you terminate the company, which you no longer need.

What to do in case of tax payment errors detected during the liquidation procedure?

Sometimes during the company’s operation, things go unplanned or the plan is false: supporting documents are lost, accountants are confused, and make mistakes, etc. All this may result in certain problems during the liquidation of the company.

Case: We were contacted by a Client whose accountant did not timely notice that the company’s total income exceeded one million and they had to apply for registration as a VAT payer by the 10th day of the following month.

Thus, they missed deadlines, didn’t pay the tax, and “shelved” the company, hoping that the tax authorities wouldn’t notice that. And no one actually noticed that until the liquidation inspection, during which a number of other violations were found.

Since the Client contacted us during the audit, our auditors and lawyers had to make every effort to resolve the situation painlessly for the company’s management.

In such cases, you can also use the “alternative liquidation” model, since there are services that sign the problem companies over themselves and perform the liquidation procedure on their own.

If you want to know more about the “alternative liquidation” process, please call our specialists.

How to liquidate an LLC by filing for bankruptcy?

As you know, bankruptcy begins when a company cannot repay debts to its creditors. However, contrary to widespread perception that the creditors are counterparties, employees and banking institutions, the tax authorities may also act as creditors.

This means that in case of tax debt, which the company is unable to settle, you can also initiate the bankruptcy proceedings. Sometimes this may be the most appropriate way to address the tax debt issue.

To sum up, each specific case has its own peculiarities. And in order to answer such question as “Can I quickly close my company?” and “How much does it cost to liquidate the company with the debts?”, we shall first thoroughly study the situation.

If you want to know about your chances of liquidating an LLC easily and quickly, don’t hesitate to contact us!

Publication date: 27/12/2019
Marina Losenko

About author

Name: Marina Losenko

Position: Associate

Education: National Aviation University

Knowledge of languages: Russian, Ukrainian

Email: [email protected]

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