At some point, you may decide to close your Limited Liability Company (LLC). Whether it’s because your business goals have changed, you’re moving on to a new venture, or your LLC has reached the end of its purpose, dissolving it properly is essential to avoid legal and financial issues.
Here’s a clear, step-by-step guide on how to legally dissolve an LLC in the United States.
Step 1: Review Your Operating Agreement
Before taking any formal steps, check your LLC’s Operating Agreement. Most agreements include dissolution procedures, such as:
- Who must vote to approve the dissolution
- How assets will be distributed
- How final decisions are documented
If you don’t have an Operating Agreement, you’ll need to follow your state’s default laws on dissolution.
Step 2: Vote to Dissolve
Most states require member approval to dissolve an LLC. This typically means holding a formal vote among members and recording the decision in the meeting minutes or a written resolution.
Step 3: File Articles of Dissolution
You must file Articles of Dissolution (or a Certificate of Dissolution) with the Secretary of State in the state where your LLC was formed. This officially notifies the state that your company is closing.
Some states require you to settle taxes and debts before filing. Check your state’s specific filing requirements, which are usually listed on the Secretary of State’s website.
Step 4: Cancel Licenses and Permits
Make sure to cancel any business licenses, permits, or registrations your LLC holds at the state, county, or city level. This helps prevent future fees or tax obligations.
Step 5: Settle Financial Obligations
Close your business accounts properly:
- Pay all outstanding debts and liabilities
- Close your business bank account
- File your final tax return with the IRS and your state
If your LLC had employees, you’ll also need to file final payroll returns and make final employment tax deposits.
Step 6: Distribute Remaining Assets
After settling all debts, you can distribute remaining assets to the LLC members, based on ownership percentages or terms in your Operating Agreement.
Step 7: Notify the IRS and State Tax Agencies
File your final federal tax return as an LLC and check the box indicating it’s your final return. If your LLC had an EIN, you can notify the IRS that you’re closing the business:
- IRS guidance: Closing a Business Checklist
You may also need to file a final state return or business closure form, depending on where your LLC is registered.
Why It Matters
Failing to formally dissolve an LLC can lead to:
- Ongoing state fees and penalties
- Legal obligations
- Tax responsibilities
Even if your business is inactive, the state may still consider your LLC “active” unless you complete formal dissolution.
Final Thoughts
Dissolving an LLC takes more than just walking away — it’s a legal process that must be handled properly. By following the steps above, you can protect your reputation, avoid penalties, and ensure a clean closure for your business.
Need more guidance? Check with your state’s official site or consult with a legal or financial professional to make sure everything is done right.