How to Close an LLC
To close an LLC, follow the operating agreement to approve dissolution, file articles of dissolution or a certificate of cancellation with the state, wind up the business by collecting receivables, paying or settling debts, and notifying creditors, then distribute remaining assets to members. File final federal and state tax returns, close payroll and sales tax accounts, cancel licenses and close bank accounts. You usually do not need a lawyer for simple cases.
Simply stopping operations does not end an LLC. Until it is formally dissolved, the state may keep charging fees and the business may keep tax filing obligations.
Step 1: Approve dissolution
Follow the operating agreement's rules for voting to dissolve. If there is no agreement, state law sets the default rules. Document the decision in writing.
Step 2: File with the state
File articles of dissolution, a certificate of cancellation, or the equivalent with the secretary of state. Some states require tax clearance first, showing all state taxes are paid.
Step 3: Wind up the business
- Finish or assign contracts.
- Collect amounts owed to the business; see unpaid invoices.
- Sell assets.
- Notify creditors. Many states have a procedure for giving notice and setting a deadline for claims, which can limit later liability.
- Pay debts and set aside reserves for known claims.
Step 4: Distribute remaining assets
After debts are paid, distribute the rest to members according to the operating agreement or state law. Distributing assets while leaving creditors unpaid can expose members to liability.
Step 5: Final taxes
The IRS lists steps for closing a business (IRS):
- File final federal income tax returns, checking the "final return" box where applicable
- File final employment tax returns and issue final W-2s
- File information returns such as Forms 1099
- Report the sale or disposal of business assets
- Close the IRS business account once filings are complete
Close state sales tax, payroll and withholding accounts too. Unpaid payroll taxes can create personal liability; see the trust fund recovery penalty.
Step 6: Cancel and close
Cancel business licenses, permits, assumed names and registrations in other states; close bank accounts and credit lines; and keep records for the required retention period.
If members disagree
If members cannot agree to dissolve, state law may allow a court-ordered dissolution. See partnership disputes.
A business lawyer is helpful when the LLC has debts it cannot pay, pending lawsuits, or disagreements among members.
Sources
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This article is general legal information, not legal advice, and reading it does not create an attorney-client relationship. Laws differ by state and change over time; talk to a licensed attorney in your state about your situation.