How to Close an LLC

Closing correctly is important

Officially dissolving an LLC is important. If you don't, you can be held personally liable for the unpaid debts and taxes of the LLC.

A few additional fees you should look for;

• Many states also levy a fee against LLCs each year. If you don't properly dissolve a company, that fee will continue to be charged.
• Some states charge a fee if an open LLC does not file a tax return. If you don't close it down, you may be charged for that.

Ownership of property

Property owned in the name of your LLC is not transferred back to you until you officially do an LLC dissolution, so you want to be sure ownership is transferred. 

Permits and company name

It's also important to close out all of your permits and give up the name to your company in a formal LLC dissolution so that no one else can step in and use them.

If you leave these active, but are not monitoring them, someone else could use them without your knowledge, placing you in legal jeopardy.

Steps to closing your LLC

Following the proper steps can help ensure you haven't missed anything important.

1. Agree to dissolve

The first step to close an LLC is to make the formal decision to do so. Hold a meeting of the members of your LLC and vote to officially dissolve the LLC.

Each state has different requirements for the vote. You may need a majority, two-thirds, or a unanimous written agreement to dissolve an LLC, so check your state's rules. You also may have included closing procedures in your LLC operating agreement form, so check that as well.

2. Make it official

Check your state Secretary of State's website for the form to file indicating that you are dissolving your LLC. Complete the form and follow the instructions for filing it with the state. This will formally close down the name of your LLC.

3. Give notice

Once the decision is made to close down the company, you need to notify all your creditors that you are about to dissolve a business, so that if they plan to file any kind of lawsuit against the company, they know the time frame in which they can do so (often three to five years is allowed). Each state has its own requirements for the official notice, so be sure to check how much notice you need to give and whether it must be published in a newspaper.

4. Wrap up the finances

Once you've decided that to dissolve LLC is the right strategy, you need to pay all outstanding bills that the LLC has, and you also need to plan ahead for obligations you don't know about or aren't currently aware of. There could be bills outstanding and you need to set aside funds to pay them in the coming months.

You must pay all of your debts before you can distribute company assets to the members when closing an LLC.

The members are personally liable to the creditors of the company, so you must be sure the creditors are paid before taking the remaining assets.

Be sure to close all utility accounts, cancel all accounts with vendors, and let customers know that you are closing (and collect outstanding payments due from them).

You will also want to notify any employees of your closing date. You will pay them until the last day they work, and in some states, you may have to pay for unused vacation time as well.

5. Complete your taxes

You must close the LLC's tax accounts with both the state and the IRS (this means paying anything you currently owe) and, in particular, you must ensure that all of your payroll withholding and sales taxes are current and funded correctly.

To close an LLC completely, you need to file a final tax return with the state and the IRS.

Make sure you check the box to show this is the final return for the LLC.

Fill out Schedule K-1 and give a copy to each member so that they know what to report on their own personal taxes in terms of losses and gains. The members of the LLC are personally liable for these taxes if they are not paid.

You also need to contact the IRS and close out your employer identification number (EIN).

6. Close things down

Once you've taken care of all financial distributions, you will want to close all bank accounts and cancel all insurance policies and licenses, permits, and registrations that the LLC holds.

Keep a copy of all the LLC's records in a safe place for seven years so that, if there is an audit, you will have proper documentation.

7. Divvy it up

Once you pay all of your taxes and make sure all debts have been covered, the assets of the LLC are divided among the members. You may need to sell some assets, so be sure to do this before you divide things up. Your operating agreement may specify the percentage each member is to receive.

To finish closing an LLC, you will want to make sure you have completed each step, so that you and all the other members are fully protected. Ensuring the company is correctly closed will allow you to move on without worries.

LLC Dissolution FAQs

What happens if I don't properly close my LLC?

You'll face ongoing problems and costs that can hurt you personally and financially. When you don't officially dissolve your LLC, the state still considers it an active business, which means you'll keep getting hit with annual fees and tax bills even though you're not using the company anymore. If your LLC has unpaid debts or taxes, creditors can come after your personal assets like your house, car, or bank accounts. You might also face penalties from the IRS and state tax agencies for not filing required tax returns. 

How do I officially dissolve my LLC with the state?

You need to file dissolution paperwork with your state's Secretary of State office, usually called "Articles of Dissolution." This is the official document that tells the state you're closing your business and want to end its legal existence. Most states let you file these papers online, by mail, or in person. You'll need to pay a filing fee that varies by state—some charge as little as $25 while others charge $100 or more. Before you can file in many states, you'll need to make sure all your taxes are paid up and get a tax clearance certificate. Some states won't approve your dissolution until they confirm you don't owe any money to the tax department.

Do I need to notify creditors when closing my LLC?

Yes, you must notify people and businesses that your LLC owes money to, and most states have specific rules about how to do this properly. This step protects you from having creditors come after you years later, claiming they never knew the business was closing. For creditors you know about (like suppliers, landlords, or loan companies), you need to send them written notices by certified mail. The notice should tell them where to send any claims, what documentation they need to provide, and give them a deadline to submit their claims, usually 90 to 180 days.

Some states require you to publish a notice in a local newspaper for a certain period. This notifies creditors you might not know about.

How do I handle final taxes when closing my LLC?

You need to file final tax returns with both the IRS and your state, marking them as "final returns" to show the business is permanently closed. This includes filing Form 1065 with the IRS if your LLC has multiple members, and issuing Schedule K-1 forms to all members showing their share of income and losses. Don't forget to close your business tax accounts. You'll also need to cancel your employer identification number (EIN) with the IRS and close any state sales tax accounts. If you have employees, make sure all payroll taxes are paid and file final payroll tax returns. Keep detailed records of all final tax filings and payments. The IRS and state agencies can still audit your business for several years after you close, so you'll need these documents to prove everything was handled correctly. Many experts recommend keeping these records for at least seven years after dissolution.

What do I do with leftover money and assets when dissolving my LLC?

You must pay all debts and obligations first before distributing any remaining assets to the LLC members. This is crucial because if you distribute assets before paying creditors, you could become personally responsible for those unpaid debts. After all creditors are paid and the required waiting period has passed, you can distribute the remaining assets according to your operating agreement or state law. Usually, this means each member gets their share based on their ownership percentage in the LLC. 

Keep detailed records of all asset distributions, including receipts and documentation of what each member received. Remember that selling assets or distributing them might trigger tax consequences, so consider consulting with an accountant before making final distributions.

Can I dissolve my LLC myself, or do I need professional help?

You can dissolve your LLC yourself if it's a simple situation with no debts, no employees, and straightforward assets. Many states provide the dissolution forms online, and the basic process involves filing paperwork and paying fees. However, professional help becomes valuable if your LLC has complicated finances, multiple members, significant assets, or ongoing legal issues. LegalZoom can help ensure you follow all state requirements correctly and avoid costly mistakes that could leave you personally liable. 

How long does the LLC dissolution process take?

Most states require you to wait 90 to 180 days after notifying creditors before you can distribute final assets. This gives creditors time to submit any claims against the business. You also need time to file final tax returns, close accounts, and handle other administrative tasks. If your LLC has complicated finances, multiple members who disagree, or legal disputes, the process could take a year or more. Simple, single-member LLCs with no debts can often be dissolved more quickly, sometimes in just a few months if you stay on top of all the required steps.