Terminate an Arizona LLC:

Step-by-Step Guide & FAQs

Terminating an Arizona LLC is a two-phase legal process governed by A.R.S. §29-3701 and A.R.S. §29-3702. The process begins with a formal member vote to dissolve the LLC, proceeds through a winding-up period in which all debts are paid and assets distributed, and concludes when the LLC files Articles of Termination with the Arizona Corporation Commission. If the LLC's Operating Agreement addresses dissolution, the agreement controls the required member vote. If the agreement is silent, Arizona law requires both a majority in interest of the members and the written consent of members who would receive more than half of the liquidation value.

 

This article answers the questions Arizona LLC members most commonly ask about the termination process, including the member vote required to dissolve, what the Operating Agreement controls versus what Arizona law supplies when the agreement is silent, the winding-up process, the order in which debts and member distributions must be paid, how to complete and file the Articles of Termination, the filing fees, the personal liability members face if they distribute assets too soon, and what limited purposes the LLC continues to exist for after termination.

Understanding Arizona LLC Termination: The Basics

What does it mean to terminate an Arizona LLC?

Terminating an Arizona LLC is the formal legal process of permanently dissolving the company and ending its existence as a legal entity. Under Arizona law, the process has two distinct phases: dissolution (the decision to end the LLC) and winding up (paying debts, liquidating assets, and distributing remaining funds to members). The process concludes when the LLC files Articles of Termination with the Arizona Corporation Commission.

 

It is important to understand that simply ceasing business operations does not legally terminate an LLC. If you stop operating your LLC without formally terminating it with the Arizona Corporation Commission, the LLC continues to exist as a legal entity, remains subject to any ongoing compliance obligations, and members may face ongoing potential liability. Formal termination through the state is the only way to bring the LLC's legal existence to an end.

What is the difference between dissolution and termination of an Arizona LLC?

Many people use the terms interchangeably, but under Arizona law they describe two different points in the same process. Dissolution is the event or decision that triggers the end of the LLC's active business operations. It is when the members decide the LLC will close. After dissolution, the LLC enters the winding-up period during which it pays its debts and distributes remaining assets.

 

Termination is the final legal event that occurs after all winding-up activities are complete. Once the Articles of Termination are filed with and accepted by the Arizona Corporation Commission, the LLC's legal existence formally ends, except for the limited purposes of handling overlooked assets, defending lawsuits, and completing unfinished winding-up matters.

How long does an Arizona LLC last if nobody terminates it?

Forever. Unless the LLC is formally terminated or its Articles of Organization contain a termination date, an Arizona LLC exists indefinitely. Unlike an Arizona corporation, an Arizona LLC does not file an annual report with the Arizona Corporation Commission or pay the Commission an annual fee, so there is no yearly bill to remind you the company is still on the books. Forgotten Arizona LLCs sit on the Commission's records for decades.

Should You Terminate, or Let the LLC Go Dormant?

Before you spend money terminating the company, consider whether you need to terminate it at all. You can let the LLC go dormant instead, which means ending all activity, business and otherwise. The LLC continues to exist, but it owns no assets, has no employees, and conducts no business. It becomes an empty shell that can sit in that condition indefinitely because Arizona does not require LLCs to file annual reports.

 

Going dormant makes sense when you are not certain you are finished, when you want to preserve the company's name, or when the LLC has a history you might want to revive. It is a bad idea if the LLC has creditors, pending claims, or assets still titled in its name, because a dormant company is still a suable company. It is also the better choice if there is any chance you will want the entity back, because a voluntarily terminated Arizona LLC cannot be revived.

 

Member Consent: The Vote to Dissolve

Who has the authority to dissolve an Arizona LLC?

The members of the LLC have the authority to voluntarily dissolve it. Under A.R.S. §29-3701, an Arizona LLC is dissolved when the members consent to dissolution in a signed written record. The authority to dissolve rests with the members, not the managers, even in a manager-managed LLC, because dissolution is a fundamental decision about the LLC's existence rather than an ordinary business management decision.

What vote is required to dissolve an Arizona LLC if the Operating Agreement addresses dissolution?

If the LLC's Operating Agreement contains provisions about dissolution, those provisions govern. The Operating Agreement controls and the members must follow whatever consent threshold it specifies. An Operating Agreement might require:

• Unanimous consent of all members
• A supermajority, such as two-thirds or three-quarters of the members by interest
• A simple majority in interest
• Any other threshold the members agreed to when forming the LLC

Members should review their Operating Agreement carefully before initiating the dissolution process. If the agreement specifies a required vote, failure to obtain that vote means any purported dissolution is not legally effective under Arizona law.

 

What vote is required to dissolve an Arizona LLC if the Operating Agreement does not address dissolution?

When the Operating Agreement does not specify the consent required for dissolution, A.R.S. §29-3701(A)(2) supplies the default rule. Dissolution requires the written consent of both of the following:

• A majority in interest of the members, meaning members who collectively hold more than 50% of the profit interests in the LLC; and
• One or more members who, upon dissolution and liquidation of assets, would be entitled to receive more than half of the value of all assets distributed to members on liquidation.

Both conditions must be satisfied simultaneously. This double-trigger default rule means that having a majority of members by head count is not enough. The consenting members must also represent a majority of the economic stake in the LLC. In many cases the same members will satisfy both conditions, but not always, particularly in LLCs where profit percentages and liquidation distributions are structured differently.

What is "majority in interest" under Arizona LLC law?

Under A.R.S. §29-3102, "majority in interest of the members" means one or more members who hold, in the aggregate, a majority of the interests in the LLC's profits held at that time by all members. Voting weight is based on profit interests, not by head count.

 

For example, if your LLC has five members and one member holds a 60% profit interest while the other four members each hold 10%, the member with the 60% interest alone constitutes a majority in interest. The four remaining members, despite outnumbering the majority-interest holder, do not collectively constitute a majority in interest of the profits.

Does Arizona LLC dissolution require a written consent?

Yes. A.R.S. §29-3701(A)(2) explicitly requires that the members' consent to dissolution be given in a record. Under Arizona law, a "record" means information inscribed on a tangible medium or stored in an electronic or other medium retrievable in perceivable form. An oral agreement among the members to dissolve the LLC is not sufficient.

 

In practice, members should sign a written Consent to Dissolution, a Dissolution Resolution, or a similar document that sets forth the members' agreement to dissolve the LLC, confirms that the required consent threshold has been met, and states the effective date of dissolution. This signed document should be kept with the LLC's permanent records. Conditions worth spelling out in that document include payment of the last expenses, the timing of the assignment of assets, who gets what, the date the LLC will cease all activity, when the Articles of Termination will be filed, and who is authorized to sign the transfer documents and the Articles of Termination on the company's behalf.

What other events can trigger dissolution of an Arizona LLC?

Beyond voluntary member consent, A.R.S. §29-3701 identifies several other events that cause dissolution:

• The occurrence of an event or circumstance that the Operating Agreement or Articles of Organization states will cause dissolution, such as expiration of a fixed term, the death or withdrawal of a member (if the agreement so provides), or the achievement or failure of a stated purpose
• The passage of 180 consecutive days during which the LLC has no members, unless new members are admitted before the period ends
• A court-ordered judicial dissolution upon application by a member, available when the members or managers are deadlocked, when the LLC's activities are being conducted unlawfully, or when managers have acted fraudulently or in breach of fiduciary duty
• Administrative dissolution ordered by the Arizona Corporation Commission for failure to maintain a statutory agent or file required documents

Winding Up the LLC's Affairs

What happens after the members decide to dissolve the LLC?

Once the LLC is dissolved, the winding-up process begins immediately. Under A.R.S. §29-3702(A), the dissolved LLC continues to exist after dissolution, but only for the purpose of winding up its activities and affairs. The LLC may not continue its regular business operations.

 

During winding up, the LLC must:

• Discharge all of the company's debts, obligations, and other liabilities
• Settle and close the company's activities and affairs
• Marshal and distribute the assets of the company
• Prosecute and defend any pending lawsuits and legal proceedings
• Preserve the company's property as a going concern for a reasonable period if necessary

The LLC may also optionally file a Notice of Winding Up with the Arizona Corporation Commission, stating that the company has commenced winding up its affairs. While not required, filing the Notice of Winding Up can help put creditors and third parties on notice that the LLC is in the process of closing.

In what order must the LLC distribute its assets during winding up?

Arizona law requires a strict priority order for distributing LLC assets during winding up. The LLC must first pay or make adequate provision to pay all known creditors, debts, obligations, and liabilities. Only after all creditor claims are fully satisfied, or adequate provision has been made for their payment, may the LLC distribute remaining assets to members.

What happens if the LLC distributes assets to members before paying its creditors?

Two statutes make this an expensive mistake. A.R.S. §29-3405 prohibits a distribution if, after giving it effect, either of two things would be true: the company would not be able to pay its debts as they become due in the ordinary course of its activities and affairs, or the company's total assets would be less than its total liabilities. Those are the cash flow test and the balance sheet test, and a distribution that fails either one is improper.

 

A.R.S. §29-3406 then supplies the consequence. A person who receives a distribution that violates §29-3405 is personally liable to the limited liability company for the amount by which the distribution exceeded what could properly have been paid. An action to collect that money is barred only if it is not commenced within three years after the distribution, which means a member who emptied the company can be pursued for three years after the check cleared.

 

How does the LLC transfer its remaining property to the members?

By written instrument, and the right instrument depends on the asset. Cash is distributed by check before the bank account is closed. Arizona real estate requires a deed signed by the LLC and recorded with the county recorder in the county where the land sits. Vehicles, trailers and watercraft require the Arizona Department of Transportation Motor Vehicle Division title documents. Equipment, inventory, intellectual property, domain names, contract rights and other personal property should be transferred with a written Assignment of Personal Property that includes a catch-all clause sweeping in assets nobody remembered at the time.

 

The point of all this paper is proof. After the LLC ceases to exist there is no company left to sign anything, so the member who ends up with the truck, the building or the trademark needs a document signed while the company still existed showing that the company transferred it.

Cutting Off Creditor Claims

Should the LLC notify its known creditors when winding up?

Notifying known creditors is not legally required, but it is strongly recommended. A.R.S. §29-3704 allows a dissolved LLC to provide written notice to known creditors, informing them that the company has dissolved and setting a deadline of at least 120 days after the claimant receives the notice for creditors to submit any claims. The notice must describe the information a claim must contain, state a mailing address to which the claim must be sent in writing, state the deadline, and state that a claim will be barred if it is not received by that deadline.

 

A creditor who receives this written notice and fails to submit a claim by the specified deadline is barred from later asserting that claim. A creditor who does submit a timely claim that the LLC rejects is barred unless the creditor commences an action within 90 days after receiving the rejection notice. This procedure does not reach claims based on events occurring after dissolution or contingent liabilities, and it does not cut off a creditor's right to pursue liens or applicable insurance proceeds.

What about creditors the LLC does not know about?

A.R.S. §29-3705 handles unknown and later-arising claims. A dissolved LLC may file a notice with the Arizona Corporation Commission and publish it in a newspaper of general circulation in the county of the company's principal Arizona address, or, if the company has no Arizona principal address, in the county where its statutory agent's office was last located. The notice must describe the information a claim must contain, give a mailing address, and state that a claim is barred unless an action to enforce it is commenced no later than three years after the later of the publication date or the filing date.

 

Claims that survive the three-year window can still be enforced against undistributed assets, or against the members to the extent of the assets each member received. Note that this optional publication is different from the newspaper publication required when an Arizona LLC is formed. Nothing has to be published in a newspaper simply to terminate the company.

 

Filing the Articles of Termination

What is the Articles of Termination and when can it be filed?

The Articles of Termination is the official form filed with the Arizona Corporation Commission that formally and permanently ends the LLC's legal existence. Under A.R.S. §29-3702(H), the Articles of Termination may be filed only after all of the LLC's known property and assets have been applied and distributed in accordance with the winding-up requirements of Arizona law.

 

The Articles of Termination certifies to the Arizona Corporation Commission the LLC's name and that all of the LLC's known property and assets have been applied and distributed as required by Arizona law. Filing the Articles of Termination prematurely, before winding up is complete, is improper and could expose the signers to legal liability.

Where can I get the Articles of Termination form?

The official Articles of Termination form for Arizona LLCs is available for free download directly from the Arizona Corporation Commission. Download Arizona LLC Articles of Termination (Form L-031).

How do I complete the Articles of Termination form?

The Articles of Termination form is short but must be completed accurately. You must:

• Enter the exact legal name of the LLC as it appears in the Arizona Corporation Commission's records, including the LLC designation (for example, "Smith Holdings, LLC")
• Check the "I ACCEPT" box next to the statutory statement confirming that all known property and assets have been applied and distributed in accordance with Arizona law
• Sign the form
• Print the name of the person signing
• Enter the date of signing
• Check the appropriate box indicating whether the signer is an authorized individual or is signing on behalf of an entity

The Articles of Termination must be filed together with a completed ACC Cover Sheet, which is available on the Arizona Corporation Commission's website.

Who can sign the Articles of Termination?

The Articles of Termination must be signed by an individual authorized to sign on behalf of the LLC. For a member-managed LLC, this is typically a member. For a manager-managed LLC, this is typically a manager. If a liquidating agent has been appointed under A.R.S. §29-3702, the liquidating agent signs. By signing, the individual is certifying to the Arizona Corporation Commission that all of the LLC's known property and assets have been properly applied and distributed in accordance with Arizona's winding-up statutes.

How do I file the Articles of Termination with the Arizona Corporation Commission?

The completed Articles of Termination and the required Cover Sheet can be filed with the Arizona Corporation Commission in any of the following ways:

• Online: through the ACC's eCorp online filing system
• By mail: Arizona Corporation Commission, Corporations Division – Examination Section, 1300 W. Washington St., Phoenix, Arizona 85007
• By fax: 602-542-4100 for standard processing; 602-542-0900 for expedited processing
• In person: 1300 W. Washington St., Phoenix, Arizona 85007

What is the filing fee for the Articles of Termination?

The Arizona Corporation Commission charges the following fees for processing Articles of Termination:

Processing Type	Additional Fee	Total Fee
Standard Processing	—	$35.00
Expedited Processing	+$35.00	$70.00
Next-Day Service	+$100.00	$135.00
Same-Day Service	+$200.00	$235.00
Two-Hour Service	+$400.00	$435.00

Payment by Visa or MasterCard is accepted for in-person filings only. Check or money order payable to "Arizona Corporation Commission" is accepted for mail or in-person filings. Credit cards cannot be used for mail or fax submissions. We recommend paying the extra $35 for expedited processing.

Does Arizona require a tax clearance before terminating an LLC?

No. Unlike Arizona corporations, Arizona LLCs do not need to obtain a tax clearance certificate from the Arizona Department of Revenue before filing Articles of Termination with the Arizona Corporation Commission. This is one of the advantages of the LLC form over the corporate form when it comes to winding up.

 

However, members and managers should ensure that all state and federal tax obligations, including final income tax returns, transaction privilege tax filings, and payroll tax obligations, are fully addressed during the winding-up process before making any final distributions to members. Unresolved tax liabilities do not disappear upon termination and can create personal liability exposure for members and managers.

Loose Ends to Close Before You File

Filing with the Arizona Corporation Commission ends the entity. It does not close anything else. Work through this list during winding up:

• Final federal income tax return. A multi-member LLC taxed as a partnership files a final Form 1065 with the final-return box checked and issues final Schedules K-1. A single member LLC reports on the member's return. An LLC that elected corporate or S corporation treatment files the corresponding final return.
• Final Arizona income tax return. File the final Arizona partnership or corporate return with the Arizona Department of Revenue and mark it final.
• Transaction privilege tax license. If the LLC held an Arizona TPT license, cancel it through AZTaxes and file the final TPT return. An uncancelled license keeps generating filing obligations and penalties long after the business closes.
• Employer accounts. If the LLC had employees, file final federal and Arizona withholding returns, final unemployment tax returns, and issue final W-2s. Deposit every dollar of withheld payroll tax, because unpaid payroll trust fund taxes follow responsible people personally after the company is gone.
• Close the EIN account. Send the IRS a letter asking it to close the business account associated with the LLC's employer identification number. See the IRS page on canceling an EIN and closing your business account.
• Bank and merchant accounts. Close every account in the LLC's name, cancel the debit and credit cards, and cancel recurring charges and auto-payments.
• Licenses and registrations. Cancel city business licenses, professional licenses, liquor licenses, contractor registrations, trade name registrations, and any foreign LLC registrations the company holds in other states. A foreign registration left open in another state accrues that state's annual fees and penalties.
• Insurance. Cancel policies effective on the termination date, but consider buying tail coverage first if the business carried claims-made liability or professional liability insurance.
• Leases, contracts and guaranties. Terminate or assign the office lease, equipment leases, service agreements and subscriptions, and get written releases of any personal guaranties you signed. A personal guaranty survives the LLC.
• Statutory agent. Once the Articles of Termination are approved, cancel the statutory agent service so you stop paying for an agent for a company that no longer exists.
• Digital assets. Decide what happens to the website, domain names, social media accounts and email. Transfer them to a member with a written assignment if they have value, or let them lapse deliberately rather than by accident.
• Records. Keep the LLC's books, tax returns, minutes and transfer documents for at least seven years after termination. Claims can outlive the company, and those records are your defense.

After the Articles of Termination Are Filed

What happens to the LLC after the Articles of Termination are accepted?

Under A.R.S. §29-3702(I), after the Articles of Termination are filed and accepted by the Arizona Corporation Commission, the LLC's active legal existence ends. However, the LLC's existence continues in a limited capacity for specific purposes:

• Participating in pending or future lawsuits and other legal proceedings
• Dealing with and disposing of property that was overlooked during the winding-up process
• Defending and pursuing claims that were not fully paid or discharged before termination
• Engaging in activities reasonably necessary to complete those purposes

The managers or liquidating agent in office at the time of termination, or, if none, the members, retain the authority to transfer property and take other necessary actions on behalf of the LLC for these limited purposes.

Can the members change their minds and undo a dissolution?

Yes, but only within a limited window. A.R.S. §29-3703 allows the members of a dissolved LLC to rescind the dissolution before the winding-up process is complete. To rescind dissolution, the same consent that was required to approve the dissolution must be obtained.

 

However, once the Articles of Termination have been filed and accepted by the Arizona Corporation Commission, the LLC's legal existence has ended and cannot be revived through rescission. If the members want to continue the business after that point, they would need to form a new LLC. This is the strongest argument for going dormant rather than terminating when you are not certain the business is finished.

What is administrative dissolution and how is it different from voluntary termination?

The Arizona Corporation Commission can administratively dissolve an LLC under A.R.S. §29-3708 when the LLC fails to maintain a statutory agent or fails to notify the Commission of a change of statutory agent or statutory agent's address. Administrative dissolution is not the same as voluntary termination initiated by the members.

 

An administratively dissolved LLC may be reinstated under A.R.S. §29-3709 by correcting the grounds for the dissolution and filing an application for reinstatement with the required fee. Administrative dissolution does not automatically end the LLC's existence. The LLC must either reinstate or complete the winding-up process and file Articles of Termination to formally end its legal existence.

Do I Need a Lawyer to Terminate My Arizona LLC?

Arizona law does not require you to hire an attorney to terminate an LLC, and for a simple single-member LLC with no debts, no employees, and no significant assets, many members handle the process themselves. However, consulting an experienced Arizona LLC attorney is strongly recommended when the LLC has:

• Multiple members, particularly if there is any disagreement about dissolution
• Significant assets, real estate, or investment accounts
• Outstanding debts, loans, or credit obligations
• Employees or payroll obligations
• Pending or threatened litigation
• Unresolved contractual obligations such as leases or service agreements
• Tax issues at the state or federal level

Mistakes made during the winding-up process, particularly distributing assets to members before creditors are fully paid, can expose members to personal liability that survives the LLC's termination for three years. An experienced Arizona LLC attorney can help ensure that the winding-up process is completed correctly, all creditor claims are properly addressed, required documentation is properly prepared and signed, and the members are protected from future liability.

Hire KEYTLaw to Terminate Your Arizona LLC

You may hire KEYTLaw to prepare the documents needed to terminate your Arizona limited liability company. When we are hired to terminate an Arizona LLC, we prepare the following:

1. Action by Unanimous Consent for all of the members to sign. This document evidences the members' approval of the termination and the conditions that apply to it.
2. Assignment of Property or a Deed to evidence the transfer of all assets, including assets nobody remembered, to the members.
3. Articles of Termination to be filed with the Arizona Corporation Commission. When the Commission approves this document, the LLC is terminated.

Our flat fee to prepare the documents and file the Articles of Termination with the Arizona Corporation Commission is $467, which includes the $70 expedited filing fee payable to the Commission.

 

To hire us, submit our online Arizona LLC Termination Questionnaire. If you would rather give us the information over the phone, call 480-664-7478 or email rk@keytlaw.com. You can also book a free office, phone or Zoom meeting to discuss whether termination or dormancy is the better move for your company. We don't charge to talk to people.

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Arizona LLC attorneys Richard Keyt and his son, attorney and former CPA Richard C. Keyt, have formed 10,000+ Arizona LLCs. We know how Arizona LLCs are born, how they operate, and how to end them without leaving problems behind.

 

See a detailed description of the 8 Bronze LLC services, 12 Silver LLC services & 20 Gold LLC services we provide when we are hired to form an LLC or PLLC.

 

To hire us to form an LLC submit our online questionnaire at keytlaw.com/llcq, call 480-664-7478 or email rk@keytlaw.com.

 

Disclaimer: We are Arizona attorneys, but not your attorney. This information is for educational purposes only and does not create an attorney-client relationship. Arizona laws are unique and filing fees and statutes change; always consult a local professional regarding your specific situation.