Why a company has to be closed formally
Stopping business does not end a US company. As long as it is on the state's register, it keeps owing annual reports, franchise taxes and registered agent fees, and the IRS still expects its returns. Penalties build quietly, and a company that is abandoned rather than dissolved can be a problem years later when you try to form a new one or open a bank account.
Dissolution is the formal process of winding up the company's affairs and removing it from the state register. It has a state side and an IRS side, and both need to be finished.
Who this is for
- Founders whose US LLC never launched or no longer trades.
- Owners moving the business to a new entity or a different country.
- Companies registered in more than one state that need to withdraw everywhere.
- Owners who stopped paying state fees and want to close the company cleanly.
What BookMyLLC handles
- A status check with the state: good standing, unpaid fees or taxes, missing reports.
- Filing any outstanding annual report or tax the state requires before it accepts dissolution.
- Preparation and filing of articles of dissolution or a certificate of cancellation.
- Withdrawal of foreign registrations in other states where the company is registered.
- A checklist for the final federal return and the letter to close your EIN account.
- Confirmation from the state once the dissolution is recorded.
Step-by-step process
- Approve the decision. Members or shareholders approve the dissolution as the operating agreement or bylaws require. We draft the written consent.
- Clear the state balance. Many states will not accept dissolution while fees or taxes are unpaid. Delaware, for example, requires all annual taxes to be paid first, and its LLC annual tax is now $400 per year.
- Wind up the business. Collect money owed, pay creditors, settle contracts, and distribute what is left to owners.
- File with the state. We submit the dissolution or cancellation document and pay the state fee.
- Withdraw from other states. Any state where the company registered to do business needs its own withdrawal filing.
- Close the tax side. File the final federal return, marked as final, then write to the IRS to close the EIN account.
- Close accounts. Close bank and payment processor accounts, and cancel the registered agent once the state confirms the dissolution.
The IRS side
The IRS asks you to file a final return for the year you close, checking the "final return" box on the form. For a foreign-owned single-member LLC, that means a final Form 5472 with a pro forma Form 1120 if there were reportable transactions that year, including the money you take out when you close. A multi-member LLC files a final Form 1065, and a corporation a final Form 1120.
Once all returns are filed and any tax is paid, you can ask the IRS to close the company's business account by letter, giving the legal name, EIN, address and reason for closing. The IRS says it cannot close the account until all required returns are filed. The EIN itself is never reassigned. This is general information, not tax advice; a CPA should confirm your final-year filings.
Companies with employees, sales tax or licences
If the company had US employees, final payroll has to be run, final employment tax returns filed, and Forms W-2 issued by their deadline. State payroll and unemployment insurance accounts must also be closed with each state agency, which is separate from the Secretary of State filing.
If the company collected sales tax, each state sales tax permit needs a final return and a request to close the account. Local business licences, professional registrations and any import or export registrations should be cancelled too. None of these close automatically when the state records your dissolution, and several continue to expect returns until you tell them to stop. We list every account we can identify from your records, so you can close them in the right order.
Documents and information you need
- Company name, state file number and EIN.
- A list of every state where the company is formed or registered.
- Signed consent from members, managers or directors approving the dissolution.
- Details of any remaining assets, debts, contracts or employees.
- Bank statements for the final year, for the final tax return.
Timeline
If the company is in good standing, many states process a dissolution filing within a few business days to a few weeks. If back reports or taxes are owed, add the time to file and pay those first. Some states also require tax clearance from the state revenue department, which can take longer. The IRS account closure follows after the final return is processed.
If the state already dissolved your company
If you stopped filing, the state may have administratively dissolved the company already. That does not remove your IRS obligations for the years the company existed, and some states still expect a formal filing to finish winding up. We check the status first and tell you which route applies.
Common mistakes to avoid
- Just walking away. Fees, penalties and IRS filing obligations keep running on an abandoned company.
- Cancelling the registered agent first. Without an agent the state may reject your filing or penalise the company before it is closed.
- Forgetting the final Form 5472. The year you close still counts, and closing distributions are reportable transactions.
- Leaving the bank account open. Close it after final payments clear, so nothing new passes through a dissolved company.
Our guide to dissolving an LLC covers the process in more detail. If you are closing one company to start another, see LLC formation, and if you still owe a return, our federal tax filing service can prepare the final one.
Dissolution at a glance
| Step | What happens | Who handles it |
|---|---|---|
| Decision | Members vote to close, as the operating agreement requires | The owners |
| Settle obligations | Debts, taxes and contracts are paid or ended | The owners, with our guidance |
| State filing | Articles of dissolution are filed in the formation state | BookMyLLC |
| IRS closure | A final return is filed and the account is closed | BookMyLLC with your CPA |
| Cleanup | Bank accounts, licences and the registered agent are closed | The owners |
Why a company should not just be abandoned
A company that stops filing is not closed; it becomes delinquent. Annual report fees and taxes can keep accruing, and the state may eventually dissolve it administratively, which can leave outstanding amounts and make a later reinstatement harder. Banks and the IRS may still treat the entity as open, and for a foreign-owned single-member LLC the Form 5472 duty continues until the company is formally closed.
A formal dissolution ends those obligations in a controlled way and gives you the paperwork to show that the company no longer exists. If you plan to start again, consider domestication or a fresh LLC formation afterwards.
Documents and clean-up
- Articles of dissolution or cancellation, as the state calls them.
- A final federal return, marked as final, and the account closure request to the IRS.
- Cancellation of state tax accounts, sales tax permits and local licences.
- Closure of bank and payment accounts after funds are distributed.
- A copy of every filing, kept with your records.
Keep the records for several years. Questions about the company can arise long after it closes, and the filing receipts are your proof that it was closed properly.
