How to Dissolve an LLC Properly (Don’t Just Walk Away)
Closing a business is sad, but “ghosting” your LLC is expensive. If you don’t officially kill the company, the state will keep charging you annual fees forever. Here is the legal checklist to exit cleanly.
The Cost of “Ghosting” Your LLC
“I’ll just stop using it.” This is a terrible idea. The state computer assumes you are still open and bills you accordingly.
| Scenario | State Status | Financial Impact |
|---|---|---|
| Proper Dissolution | Closed / Inactive | $0 Future Fees |
| Abandonment | Active / Delinquent | Fees + Penalties |
| Administrative Dissolution | Forced Close | Personal Liability |
| Step | Priority |
|---|---|
| Pay Taxes | #1 |
| Pay Yourself | Last |
How to Close It (Step-by-Step)
Do this in order. If you skip Step 2, Step 4 will be rejected.
Step 1: The Vote
If you have partners, hold a meeting and vote to dissolve. Record this in your corporate minutes. If you are a Single-Member LLC, just sign a written consent.
Step 2: Tax Clearance (The Hard Part)
Some states (like New York) require you to pay all back taxes and get a “Tax Clearance Certificate” before they let you leave. This can take months.
Step 3: File “Articles of Dissolution”
File this form with your Secretary of State. It usually costs $20 – $100. Once processed, your LLC is legally dead.
Step 4: Notify Creditors & Pay Debts
Tell your landlord, suppliers, and lenders you are closing. Warning: If you take money out of the company while owing them money, they can sue you personally (“Fraudulent Conveyance”).
Step 5: Distribute Remaining Assets
Only after everyone else is paid can you transfer the remaining cash or equipment to the owners (Members).
Don’t Forget the IRS
The IRS doesn’t automatically know you closed.
- Final Tax Return: When filing your last tax return (Schedule C or 1065), check the box that says “Final Return.”
- Cancel EIN: Send a letter to the IRS asking to close your business account associated with your EIN. (Note: The EIN number itself is yours forever, but the account becomes inactive).
- Bank Account: Close the business bank account last, after all checks have cleared.
Pro Tip: The “Personal Guarantee” Trap
If you signed a “Personal Guarantee” for a business credit card or office lease, the bank can still sue you personally even after the LLC is dissolved. You must pay these off or negotiate a settlement personally.