November 02, 2021
You might decide to close — or dissolve — your LLC for plenty of reasons. You may have realized that business ownership isn’t for you, or you may have hit hard times. You may also have decided you want a new LLC and business in a new industry, and you’ve outgrown the LLC you’ve got.
Whatever your reasons for closing up shop, we want to make sure you do it right. We’ve included reasons why you want to make sure you dissolve your LLC, the steps to take, and what to do if you just want to hit pause.
When your business is no longer your focus or you’re justnot getting any business, you can just stop working and be done, right? Wrong. You’ll want to go through the formal process of dissolving an LLC before you wash your hands of it.
Why? Because if you don’t notify the government that you’re shutting down, you leave your LLC open to lawsuits and claims on unpaid debts and taxes. This is especially relevant if you have a partner in your LLC; you never know what other people are doing with their funds. But aside from liability, states also (typically) require you to pay an annual fee to run a business. If you’re not running the business anymore, why pay for it?
When you make the decision to dissolve your LLC, it’s time to get ready for a bit of paperwork. But first...
If you have an LLC partnership, though, you’ll want to make sure all of the partners are on board with the dissolution. Once everyone is on board, you can vote to dissolve the LLC using whatever method you’ve outlined in youroperating agreement (you have one of those, right?).
If you don’t have an operating agreement or it doesn’t touch on the topic of dissolution, you’ll want to follow whatever guidelines your state has for dissolving an LLC. Make sure you record the agreement between the partners in writing to cover your booty in the future.
Then, you’ll want to file a certificate of dissolution with your state’s Secretary of State (the same agency under which youfiled the LLC). You can typically find said certificate on their website or just search for “certificate of dissolution for LLC in [insert your state].”
Once you’ve handled the filing of the certificate, you’ll pay your final invoices or bills and file your last tax return. You’re almost there! Take a minute to breathe — this might be a tad bit emotional!
Remember thosebusiness licenses you got when you opened your business? You can go ahead and cancel those. You’ll also want to cancel your federal employer identification number with the IRS. To do this, you’ll send the IRS a letter with the complete legal name of the business entity, the EIN number, the business address, and the reason you want to close up shop. They’ll take it from there.
The last not-so-fun part: winding things down to officially close up shop. If you run a client-based business, you’ll want to make sure that your clients’ projects are all tidied up. Send them an email telling them thanks for working with you and where they can find you next. If you are a product shop, you’ll want to let everyone know that you’re closing out your inventory — you can even host an inventory blowout sale.
And if you have a brick-and-mortar store, you’ll want to make sure your lease is taken care of, your equipment or furniture is sold or donated, and bills to that location are cancelled. No matter what kind of business you run, you’ll want to pay out your vendors and contractors so you leave in good standing.
Finally, it’s time to decide what to do with what’s left from your business. Any remaining assets — including cash, equipment, etc. — should be split between members. If you run your LLC all by yourself, to the victor go the spoils! If you have partners, though, you’ll want to follow whatever guidelines you have for splitting assets in your operating agreement.
If this sounds like a lot and you’re thinking, “I might want to come back to my business in a few months,”do not dissolve your LLC just yet.Instead, put things on hold. To do that, you’ll need to completely stop any current projects or exchanges you’re working on. You’ll have to continue paying your taxes, any annual fees, and filing any forms that are required as usual.
But that’s it. You can pause operations at any time — you’reallowed to take a pause. If, after some time away, you decide you’re happier without running your LLC, you can follow the steps above to dissolve it completely. If you decide that you still want your LLC and are ready to go back, great! Obviously, you’re still open to liabilities even during your downtime, so keep that in mind.
We get it. Sometimes business just doesn’t work out. Sometimes, you want to start a new adventure, and other times you just want to take a break. We’ve all been there. No matter why you need to dissolve your LLC, you now have the steps you need to do so properly.
Still have questions about LLCs? More curious about how tostart a new one than end an old one? We’vecurated a playlist for you on everything you need to know about LLCs. Drop your questions in the comments!