To dissolve an LLC, you vote to close it, file a dissolution (or cancellation) document with the state, settle debts and taxes, file your final tax returns, and then close the business accounts. Skipping any of these steps is the most common reason a "closed" company keeps collecting fees, penalties and tax notices. This guide walks through the process in the order you should do it.
Rules differ by state and by how your LLC is taxed. This is general information, not legal or tax advice. Check your state's filing office and your operating agreement before you file.
Dissolving vs. abandoning an LLC
Simply stopping business does not close an LLC. The state still treats the company as active, so annual reports, franchise or annual taxes and registered agent fees keep accruing. In many states unpaid obligations lead to administrative dissolution later, but the unpaid balances and penalties can remain on record. A formal dissolution ends the company's legal existence and stops those obligations going forward.
Step 1: Check your operating agreement and vote
Start with your operating agreement. It usually says how members decide to dissolve: unanimous consent, a majority, or a set percentage of ownership. If there is no operating agreement, the default rules of your state's LLC act apply. Record the decision in a written resolution or meeting minutes and keep it with your company records.
Step 2: Settle the company's affairs
Before filing, wind up the business:
- Complete or cancel open contracts and notify clients, vendors and landlords.
- Collect money owed to the company.
- Pay debts and outstanding bills. Creditors are generally paid before members receive anything.
- Distribute what remains to the members according to the operating agreement.
Step 3: Bring state filings and fees up to date
Most states will not accept a dissolution while annual reports or taxes are unpaid. File any overdue annual reports and pay what you owe. In Delaware, for example, the LLC's annual tax must be paid through the year of cancellation before the state accepts the filing. See our Delaware franchise tax guide for how that tax works.
Step 4: File the dissolution document with the state
The document has a different name depending on the state: Articles of Dissolution, Certificate of Dissolution or Certificate of Cancellation (Delaware uses the Certificate of Cancellation). You file it with the Secretary of State or equivalent office and pay a filing fee. Some states also require a tax clearance or a final report first. The filing usually asks for the company name, formation date and the effective date of dissolution.
Step 5: File final tax returns
Closing the state record does not close your federal tax obligations. How you file depends on how the LLC is taxed:
- Single-member LLC (disregarded): report the final income and expenses on the owner's return. A foreign-owned single-member LLC that has to file Form 5472 with a pro forma Form 1120 files a final one as well.
- Multi-member LLC (partnership): file a final Form 1065 and check the "final return" box. Each member receives a final Schedule K-1.
- LLC taxed as a corporation or S-Corp: file a final Form 1120 or 1120-S and check the "final return" box.
If you had employees, you also file final payroll tax returns. Our US company tax preparation service covers these filings.
Step 6: Close the EIN account and bank accounts
The IRS does not delete an EIN, but you can ask it to close the business account by sending a letter with the company's legal name, EIN, address and reason for closing. If you received an EIN letter (CP 575 or 147C), include a copy. See EIN cancellation for help with this step. Close the company's bank accounts only after all payments and distributions clear, and cancel business licenses, permits and any subscriptions billed to the company.
Step 7: Keep your records
Keep the dissolution paperwork, final tax returns, operating agreement and financial records. As a general rule, tax records should be kept for at least three years after filing, and longer in some situations. Ask your tax adviser how long to keep records in your case.
What if you want to keep the company but stop operating?
If you may use the LLC again, it can cost less to keep it in good standing, since you only pay annual fees, than to close it and form a new one later. Compare the annual cost with the cost of re-forming before you decide.
Frequently Asked Questions
How long does it take to dissolve an LLC?
The state filing itself can take from a few days to a few weeks depending on the state and filing method. Winding up debts, final taxes and account closures usually takes longer than the filing.
Can I dissolve an LLC with unpaid taxes?
You can often file, but the tax debt does not disappear. Many states require outstanding taxes and reports to be settled first, and the IRS and the state can still pursue unpaid amounts after dissolution.
Do I need a lawyer to dissolve an LLC?
Not always. A simple LLC with no debts can usually be closed with the state forms and final tax returns. A lawyer or tax professional helps if there are disputes between members, significant debts or complex tax issues.
Do non-US owners have to do anything different?
The state dissolution works the same way. The difference is on the tax side: foreign-owned LLCs often have additional filings, such as Form 5472, that should be completed for the final year.
Does dissolving an LLC cancel the EIN?
No. You have to ask the IRS to close the business account separately. The EIN stays tied to that entity.
Need the filing handled? See our US company dissolution service.
