How to Dissolve an LLC

Do I Need to Notify the IRS If I Close My Business?

Yes, you must inform the IRS about the dissolution by filing the final tax returns and checking the box indicating that it is the final return. This step ensures that the IRS knows the business is no longer operating. Submit the final income tax return for the LLC and any employment tax returns if you had employees. This includes Forms 1065, 1120, or 1120S, depending on your LLC’s tax classification. Your EIN will remain assigned to your business even after it closes; however, the IRS will mark it as closed. This ensures that the EIN cannot be used for future business activities.

How Much Does It Cost to Dissolve an LLC?

The cost to dissolve an LLC varies.

• Filing fees. State filing fees for the Articles of Dissolution typically range from $20 to $200. The exact amount depends on the state where you registered your LLC.
• Additional costs. You may need professional assistance to ensure all steps are completed correctly. If so, you could incur additional costs such as legal fees, accounting fees, and costs associated with settling debts and distributing assets.

Additional Considerations for LLC Dissolution

Several other factors need to be considered when closing an LLC.

Canceling Licenses and Permits

Be sure to cancel all business licenses and permits to avoid future liabilities. This includes state and local business licenses, sales tax permits, and any industry-specific licenses.

Notifying Creditors and Stakeholders

Inform creditors, customers, and other stakeholders about the dissolution. Providing advance notice helps maintain good relationships and ensures a smooth winding-up process.

Record-Keeping Requirements

Maintain records of the dissolution process for future reference, including final tax returns and accounting documents. It’s recommended to keep these records for several years in case of any future inquiries.

Frequently Asked Questions About Dissolving an LLC

1. What Is the Difference Between Dissolving and Terminating an LLC?

Dissolving involves closing the LLC and settling its affairs while terminating is the final step in which the LLC ceases to exist legally.

2. How Do You Close an LLC?

Closing an LLC involves member agreement, filing Articles of Dissolution, winding up affairs, settling debts, and distributing assets.

3. Do I Need to Notify the IRS if I Close My Business?

Yes, you must notify the IRS by filing your final tax returns and indicating that they are the final returns.

4. How Much Does It Cost to Dissolve an LLC?

The cost varies by state but typically ranges from $20 to $200 in filing fees, plus any additional legal or accounting costs.

Conclusion: Properly Dissolving an LLC

Dissolving an LLC involves several important steps to ensure compliance with state laws and avoid future liabilities. By understanding the process, including filing requirements, costs, and IRS notifications, you can effectively dissolve your LLC and confidently move forward. Always consult with legal and financial professionals to ensure you handle all aspects of the dissolution correctly.