How to close (dissolve) a US LLC properly

How to dissolve an LLC: the steps in order

1. 1

   Approve the dissolution

   Follow your operating agreement. Without one, Wyoming requires every member's consent and Delaware requires members owning more than two-thirds of the profits interest. Put the decision in writing.

2. 2

   Wind up and pay debts

   Finish or cancel contracts, collect what you're owed, sell or distribute assets and pay creditors before members receive anything.

3. 3

   Pay final state taxes and reports

   Bring the LLC up to date. Delaware won't accept a cancellation until every annual tax is paid, including the current year's.

4. 4

   Withdraw from other states

   Cancel any registration as a foreign LLC so those states stop expecting reports and taxes.

5. 5

   File with your formation state

   Articles of dissolution in Wyoming, a certificate of cancellation in Delaware, or your state's equivalent.

6. 6

   File final federal returns

   Check Final return on the last Form 1120 with Form 5472, or on Form 1065, and file any final payroll or information returns.

7. 7

   Close accounts

   Close payment processors and then the bank account once the last payments clear, and ask the IRS to close the business account for your EIN.

8. 8

   Keep the records

   Store the member approval, state filings, final returns and bank statements.

Approve the dissolution and settle the LLC's debts

Start with your operating agreement, which may set its own vote for dissolving. If it's silent, state law decides: Wyoming dissolves an LLC on the consent of all members, and Delaware on the vote or consent of members owning more than two-thirds of the profits interest. A single-member LLC's owner simply signs a written consent.

Dissolving doesn't end the LLC on the spot. It continues only to wind up: finish its business, collect and sell what it owns and pay what it owes. Both states pay creditors first. In Wyoming, what remains goes to members as a return of their unreturned contributions and then in equal shares, unless the operating agreement or the LLC's IRS filings say otherwise.

Handle known and unknown claims

Wyoming lets a dissolved LLC send known claimants a written notice with a deadline at least 120 days after they receive it, and publish a newspaper notice so other claims are barred unless a lawsuit is filed within 3 years. Delaware requires a dissolved LLC to pay, or make reasonable provision to pay, all claims known to it. If the LLC can't pay everyone in full, talk to a US lawyer before distributing anything.

Pay final state taxes before you file

States won't close an LLC that owes them. Wyoming's articles of dissolution checklist requires the LLC to be active and in good standing, which generally means its annual reports and license taxes are current. Delaware requires the annual tax to be paid before a certificate of cancellation is filed, including the full tax for the calendar year in which the cancellation takes effect.

Delaware doesn't prorate the tax, so timing matters. An LLC whose cancellation takes effect in December pays that year's $400. One that waits until January pays the previous year's tax, if still unpaid, plus a full $400 for the new year. If you're closing near year-end, file before December 31.

Also file final returns for any state sales tax or payroll accounts, and close those accounts with each state's revenue department.

File articles of dissolution or a certificate of cancellation

Wyoming: Articles of Dissolution

Wyoming's form is one page. It gives the LLC's exact name and a signed certification that the LLC has met the dissolution and winding-up requirements of the Wyoming LLC Act and that the signer has authority. The fee is $60, paid by check or money order. Mail the form with payment, because the state won't accept it by email, and allow up to 15 business days.

Delaware: Certificate of Cancellation

A Delaware LLC files a certificate of cancellation once it has dissolved and finished winding up. The certificate states the LLC's name, the date its certificate of formation was filed and, if you want one, a future effective date. The fee is $220, plus $50 for each registered series named, and the annual taxes must be paid first.

Other states have their own forms and fees; find yours through the state guides. We can file your dissolution for $149 plus the state fee.

File final federal returns and close your IRS account

The IRS expects a final return for the year the business closes, with the Final return box checked near the top of the first page.

• Foreign-owned single-member LLC: file the last Form 5472 with a pro forma Form 1120 and check Final return in item E. Form 5472 treats amounts tied to dissolving the LLC, including the final distribution to you, as reportable. Our Form 5472 guide explains how to list them.
• Multi-member LLC: file the last Form 1065, check Final return and mark each Schedule K-1 as final. If you withheld for foreign members, file the final Forms 8804 and 8805.
• LLC taxed as a corporation: file Form 966 after adopting the plan to dissolve, and a final Form 1120 or 1120-S.
• Staff or contractors: file final payroll returns, and Forms 1099-NEC for US contractors paid $2,000 or more that year.

A corporation that dissolves generally files its final Form 1120 by the 15th day of the 4th month after the date it dissolved. Confirm with your preparer how that applies to your pro forma return, and file Form 7004 if you need more time.

Close the IRS business account for your EIN

An EIN is permanent. The IRS won't cancel it, but it will deactivate the number and close the business account once every required return is filed and all tax is paid. Send a letter with the LLC's full legal name, EIN, business address and reason for closing, plus a copy of the EIN assignment notice if you kept it. Use the mailing address on the IRS's closing a business page.

Close bank and payment accounts and other registrations

Close accounts in order. Shut payment processors such as Stripe once their payouts are done and the window for customer disputes has passed. Keep the business bank account open until the last payouts, refunds and tax payments clear, then pay out any remaining money to members and close it.

• Withdraw foreign registrations in every other state where the LLC registered to do business. Delaware, for example, charges a registered foreign LLC the same annual tax as a domestic one until it cancels.
• Cancel state tax permits and payroll accounts with each state.
• Cancel subscriptions, domains and software billed to the LLC.
• Keep your registered agent until the state confirms the dissolution, so final notices still reach you. See why the registered agent matters.

Owners in India

Closing the LLC ends your overseas investment, so speak to your bank and Chartered Accountant about RBI reporting before you move the final money home. RBI's regulations require a disinvestment to be reported within 30 days of receiving the proceeds. See forming a US LLC from India.

What happens if you just stop paying?

The LLC doesn't close when you walk away. It stays on the state's records, charges and penalties build up, and the state eventually ends the LLC on its own terms.

Wyoming

An annual report is delinquent from the second day of the month after its due date, and if it isn't filed within 60 days of the due date, Wyoming administratively dissolves the LLC. You can reinstate within 2 years by paying the delinquent fees plus a $100 reinstatement fee; after 2 years, Wyoming law doesn't allow it. If your registered agent resigns and you don't replace it, the LLC is treated as defunct 60 days after notice, and the state's fee schedule lists $350 to reinstate it.

Delaware

Unpaid tax grows by a $200 penalty and 1.5% interest a month, and it's a debt the state can sue to collect. The LLC loses good standing, and Delaware won't accept filings for it until the tax is paid. After 3 years of unpaid tax, the certificate of formation is cancelled. Reviving the LLC later takes a certificate of revival with a $220 fee plus all the unpaid tax, penalties and interest.

Administrative dissolution doesn't clear your federal filings either. A foreign-owned LLC that had reportable transactions still owes Form 5472 for those years, and the $25,000 penalty for not filing still applies. Our annual compliance checklist lists what keeps running until the LLC is closed.

Frequently asked questions