A Guide to Dissolving Your Business
To cancel or dissolve your LLC or corporation, you must file Articles of Dissolution or a Certificate of Dissolution with the state. Check out our state-specific guides for dissolution below.
What is LLC or Corporate Dissolution?
“Dissolution” refers to the official cancellation of a business entity’s legal existence, which can happen either involuntarily or voluntarily.
Either way, formally dissolving a company with the state is an important first step when closing up your business.
Find the dissolution guide for your state.
Why dissolve a business?
Formally dissolving your business with the state is a critical part of closing your company because it reduces the individual liability of your business’s members or shareholders. A dissolution can be voluntary or involuntary.
Involuntary Dissolution
Involuntary dissolution occurs when an LLC or corporation fails to meet its obligations to the state (for example, not filing an annual report or paying state taxes), and the office of the secretary of state decides to dissolve the company without its consent.
Voluntary Dissolution
Voluntary dissolution happens when an LLC’s members or a corporation’s shareholders vote to cease operations. While this vote does not officially close the business, it is the first step in the process of formally dissolving the LLC or corporation.
Whether your company’s dissolution is voluntary or involuntary, failure to properly dissolve can leave those with a stake in the business exposed to creditors, lawsuits, ongoing state filing requirements and penalties, franchise taxes, and even the possibility of corporate identity theft.
File Dissolution Paperwork with the State
Just as you filed Articles of Incorporation with the state to create your corporation or Articles of Organization to form your LLC, you must file dissolution paperwork in your home state to formally close your LLC or corporation. This paperwork is usually called Articles of Dissolution for corporations and a Certificate of Dissolution for LLCs.
After you complete your Certificate of Dissolution or Articles of Dissolution, you’ll need to submit the document to the state agency in charge of regulating businesses (usually the office of the secretary of state) and pay the state filing fee.
Since the forms and filing fees vary from state, we included links to state-by-state requirements at the top of this page.
In most states, your dissolution filing will require:
- The name of your LLC or corporation
- The date of your company’s organization or incorporation
- A statement to the effect that your company is formally dissolving
- A statement indicating the event leading to the company’s dissolution (usually a company vote or an event—such as an LLC owner’s death—in the company’s operating agreement or bylaws that requires the company to cease operations)
- The effective date of the dissolution
Not what you’re looking for? Looking to form a new LLC or incorporate your business instead? Check out Northwest’s guides on how to form an LLC or how to incorporate your business.
Steps After Dissolution
Formally dissolving an LLC or corporation is really only the first step to closing your business down. After your members or shareholders vote to dissolve the company and you submit the required state paperwork, you’ll still need be required to complete several steps.
Though each business’s situation will be slightly different, you can expect to do the following (at the least):
1. Notify Company Creditors
You will need to let your company’s creditors know that the company has or will be dissolved by mailing them notice. From there, you’ll work toward settling your company’s debts.
2. Notify the IRS
You will need to notify the IRS of your company’s dissolution and pay your business’s federal, state, and local taxes. Use the helpful IRS Closing a Business Checklist as you go.
3. Liquidate Company Assets
Once you’ve notified your company’s creditors and the IRS, and paid any company taxes or debts, it’s time to liquidate the company’s remaining assets.
4. Make Final Distributions
You will need to make all final distributions to members or shareholders based on their ownership share or percentage of ownership in the company.
Most LLCs and corporations outline the dissolution process in their LLC operating agreements or corporate bylaws. In general, it’s important that all members and shareholders understand how the dissolution process works, what they are entitled to when the business has shut down completely, and what their legal obligations are.
Free guides and resources for business owners
We have state-specific guides on how to dissolve a business, how to reinstate a business, how to form a business, and everything in between.