What Happens If My LLC Fails?

When filing for an LLC, you must include your full proposed company name on the application. If you’re worried the LLC looks too stiff for branding, you can file a DBA. If you don’t file a DBA, the name must be displayed exactly as written when incorporated.
To cancel an LLC, you need to dissolve your entity with the secretary of state by filing a form. By dissolving your entity, you ensure you are no longer liable for fees, reports, and taxes.
When an LLC fails, owners are personally liable if they are not careful on securing loans, signing leases, or spending the LLC’s money.

If you fail to pay creditors, they may attempt to eliminate LLC limited liability protection by proving the business was created simply to provide protection for its owners.
LLC members who personally guarantee loans put personal assets at risk. Creditors can sue if the LLC doesn’t repay debt.
LLC members normally have limited liability and cannot be sued personally for LLC activities or debts.
If debts cannot be paid, assets may be sold off to pay liquidation costs. LLC members who don’t personally guarantee loans aren’t responsible for debts if earnings can’t pay creditors.

Declaring bankruptcy for an LLC can be complex. An LLC provides limited liability protection for its members. However, in certain cases personal assets might be at risk. LLC bankruptcy options include Chapters 7, 11, and 13.
LLC losses pass through to your personal income tax where you can write off the loss. To improve financial resilience, increase credit access and use better cash-flow management strategies. LLC members can claim a loss on their personal return if they have sufficient ownership interest.

Within California, dissolution applies to both corporations and LLCs while cancellation only applies to LLCs. Termination means the end of the legal existence of an entity while dissolution means the winding up of entity affairs before termination.
You can’t cancel your EIN with the IRS until all taxes are paid and returns are filed. If you don’t properly dissolve an LLC in New York, you could be stuck with unpaid bills or legal issues. You cannot apply for reinstatement in New York if you voluntarily dissolved your LLC.