Whether your business did not work out, you are retiring, or you are restructuring, closing your LLC properly is just as important as forming it. If you simply stop operating without formally dissolving, you could owe annual report fees, franchise taxes, and penalties for years to come.
The Dissolution Process
Step 1: Vote to Dissolve
Check your operating agreement for dissolution provisions. Multi-member LLCs typically require a vote of members. Single-member LLCs can simply make the decision.
Step 2: File Articles of Dissolution
File a "Certificate of Dissolution," "Articles of Dissolution," or "Certificate of Cancellation" (terminology varies by state) with your state's Secretary of State. Filing fees range from $0 to $100 depending on the state.
Step 3: File Final Tax Returns
- Federal: File your final Schedule C (single-member) or Form 1065 (multi-member) and check the "Final Return" box.
- State: File your final state income tax return and any final franchise tax reports.
- Employment taxes: If you had employees, file final payroll tax returns (Form 941/940) and issue final W-2s.
Step 4: Cancel Your EIN
You cannot technically cancel an EIN, but you can close your business account with the IRS by sending a letter to the IRS explaining that the LLC has been dissolved and the EIN should be deactivated.
Step 5: Settle Debts and Distribute Assets
Pay all outstanding business debts, collect receivables, and distribute remaining assets to members according to the operating agreement.
Step 6: Cancel Business Licenses and Permits
Notify your city, county, and any licensing agencies that your LLC has dissolved.
Step 7: Cancel Your Registered Agent
After the Articles of Dissolution are filed and confirmed, cancel your registered agent service to stop annual billing.
Step 8: Close Business Accounts
Close your business bank account, cancel business credit cards, and cancel any recurring subscriptions.
Common Mistakes
- Not filing dissolution paperwork. If you just stop operating without formally dissolving, the state considers your LLC still active. You will owe annual reports and fees until you formally close it.
- Forgetting state tax clearance. Some states require a tax clearance certificate before they accept your dissolution filing.
- Not notifying creditors. Some states require you to notify known creditors of the dissolution and give them time to file claims.
If You Are Also Registered in Other States
If your LLC is registered as a foreign LLC in other states, you must file a withdrawal or cancellation in each of those states as well. Otherwise, you will continue to owe annual fees in those states.
Need help winding down your LLC? Ask Sedes about the dissolution process for your specific state.
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