Closing your business can be difficult. The IRS provides resources to help you navigate this. This page outlines steps to close your business for federal tax purposes and to help you understand what to file and report before closure.
An LLC may be classified as a partnership, corporation, or entity separate from the owner. A sole proprietor owns an unincorporated business themselves.
Removing uncertainty when closing an LLC requires properly dissolving it by filing articles of dissolution and following state rules where you registered the company.
State Requirements and Procedures
Texas law requires the company to cease business, except to wind up after taking action to trigger winding up. BOC sections outline various winding up tasks for an LLC.
The most common dissolution method is filing Articles of Dissolution with the Secretary of State. Filing requires basic information like the LLC’s name and the effective date of closure. Further steps include:
- Filing final tax returns
- Completely dissolving an LLC allows using “terminated.”
Your EIN continues to be assigned to your company after dissolving your LLC. The IRS does not cancel an entity’s EIN if it no longer requires it.
In NJ, dissolving an LLC costs vary. Costs include the filing fee, outstanding debts and liabilities, and liquidating assets.
Dissolving an LLC in Pennsylvania requires paying pending taxes and obtaining tax clearance. File applications separately.
Approval and Official Forms
Dissolving LLCs requires owners’ approval. For corporations, shareholders must approve. In smaller companies, members know the situation. Documents such as the articles of incorporation or operating agreement outline the process. The board of directors drafts and approves a resolution. Shareholders vote on approved resolutions.
Forms often required when dissolving an LLC include:
- Certificate of Dissolution. It officially terminates the LLC’s existence, releasing it from future obligations. Provide the LLC’s name, address, the date of dissolution, and the reason.
Understanding Dissolution
“Dissolve” refers to formally ending a business entity’s legal existence, either automatically or deliberately.
The IRS outlines typical actions to dissolve an LLC based on your business structure:
- Make final federal tax deposits
- File final quarterly or annual employment tax form
A dissolution can be voluntary or involuntary. Voluntary dissolutions are deliberate decisions to end operations. For LLCs, partners can informally agree dissolution is best. For corporations, shareholders vote on a board-approved proposal. Involuntary dissolutions occur over disputes interfering with operations. Shareholders file lawsuits requesting dissolution that courts approve.
Before closing your LLC, divide remaining assets by partners’ percentages after satisfying obligations.
Steps to Close an LLC
Vote to dissolve
File a final tax return
File an article of dissolution
Settle outstanding debts
Distribute remaining assets
Conduct other wind-down processes
If your documents don’t state when dissolution is triggered, your state’s laws govern.
States often allow LLCs to dissolve by member votes, but rules differ. Some states don’t specify that votes can dissolve companies—include that in operating agreements.
Properly dissolving your LLC protects you from potential liabilities. This guide covers:
- How to dissolve your LLC
- Common reasons for dissolution
- State-specific requirements
- Types of dissolutions
- Key terms associated with dissolution
As an LLC owner, you must file annual reports, pay fees, and taxes. These obligations stack up until you dissolve your LLC.
If multiple founders exist, all must vote on dissolution before taking action. An operating agreement may set dissolution voting rules.
Filing for dissolution could come at various stages based on your state.