Deciding to end your limited liability company (LLC) is a tough one to make. No matter what the reason is behind your decision, there are certain steps you have to take to dissolve an LLC.

Properly dissolving an LLC is important for a couple of reasons. First, it ends your liability related to the business. In the eyes of the state, a dissolved business is no longer responsible for filing annual reports, paying filing fees, or submitting business tax forms.
Second, it gives you closure. Going through the correct process means everyone is paid the appropriate amount. All debts are settled and your name keeps a good reputation.

We’ve created a guide for you to follow should you need to dissolve your LLC. It answers many questions and helps you avoid pitfalls. It can also help you move through the dissolution process with confidence.

How to dissolve an LLC

The decision to dissolve your LLC isn’t yours alone. It is one to be discussed by board members. There should be a long time of questions and discussions before you move forward. There could be several reasons for dissolving an LLC. Some include:

  • The small business isn’t succeeding as hoped.
  • Board members can’t work together anymore.
  • The business never opened.
  • The business was sold.
  • The death of a business partner occurred.

Once you’re ready to close up shop, here are the steps to follow:

1. Follow the operating agreement

The most important aspect of dissolving the LLC is to follow the operating agreement. This is an agreement all board members signed when the company was first formed. The agreement lists how bills are to be paid, how profits and LLC assets are to be disbursed and both the circumstances and the manner of ending the business.

Although this type of agreement is never filed with the state or federal government, it is a legally binding agreement and failure to follow it has legal consequences.

2. Take a vote

Some operating agreements have a “dissolution trigger,” like the death of a business partner. Even so, board members must participate in a voluntary dissolution. The operating agreement should have a procedure outlined for how to conduct a vote including notifying all board members, when board meetings for dissolution can be held, any legal advertising, and other procedures.

If the board gets a majority vote for dissolving the company, it’s important to put the motion and vote in the company minutes to maintain business records.

3. Let others know


Employees should be the first to know once the board has voted to dissolve a business. There isn’t a set way to tell them but it’s best to tell them in person and allow them to ask questions.

Many employers wait until the business is close to the end date to announce it to employees, but be mindful of your staff’s feelings and income. They need a timeline to prepare and look for another job.

One reason employers delay telling employees is because they fear all will leave for other work and that would hurt the business trying to finish up contracts and projects in its final days. A way to avoid that possibility is to offer larger bonuses and help in job searches for anyone who stays until the end.


Vendors should be told soon after the vote is taken so they know they will stop deliveries at some point. You will need to have an end date for them to stop all orders and have a final settlement.

You may need to negotiate with vendors depending on the contract you signed. Any penalty clauses will need to be part of the debt settlement and the board must be notified of penalties.


You should let customers know pretty quickly about your plans because word will get around and they will feel betrayed if they don’t hear it from you. It helps to give them an end date so they will continue doing business until the final day.

Depending on your business and the timing of your dissolution, you may want to start some closeout sales of inventory.

4. Settle tax matters

The first order of business in a dissolution of an LLC is to settle all tax matters. Typically, states won’t allow you to continue with your dissolution unless you’ve done this step.

File your federal tax forms first. When filing paperwork, have your accountant draft a letter stating this is the final tax return for the business. File the state taxes in the same manner. Both should send you a letter stating you’ve satisfied any tax liability.

You will submit a copy of the letter or certificate with your dissolution paperwork to the state.

5. Notify state offices

Every state is different and each governs corporations uniquely. Go to the Secretary of State website for your state to see what rules apply when dissolving a business. You may find that you need to contact several state departments to notify them of the decision.

You may owe money to any number of departments, depending on how you pay them throughout the year. Some agencies you will need to contact include:

The Department of Labor is important because some states require you to file quarterly or twice yearly employee tax reports. You need to notify them when you shut down the business in writing so you won’t need to file any more reports or pay additional taxes beyond the end date.

Many states require businesses to pay a sales and use tax if they sell taxable goods. You will need to notify them of your end date to avoid paying more than you should.

A number of states also require certain industries to hold professional licenses, such as hair stylists and chiropractors. You will need to contact them to notify of your end date and ask for procedures for those professionals to continue to hold their licenses independently.

6. Settle debts

Settling debts is probably the most agonizing part of dissolving a business, particularly if the business failed. Organize your debts by priority and begin to pay them off.

One thing that should be discussed early on with the board before the dissolution vote is the amount of debt owed and how long it will take to resolve it. That will affect your end date for the business because you can’t dissolve a business with debt.

The LLC may need to function for a while until all the debts are paid.

7. End contracts

It’s time to formally end all contracts once you settle all the business debts. This is important because it means the vendor or client can’t come back later claiming something is unfulfilled.

8. File a Certificate of Dissolution

You need to file official paperwork to dissolve the business with the state. Just as you filed formation documents, usually called Articles of Organization, there’s LLC dissolution paperwork called a Certificate of Dissolution or Articles of Dissolution.

An Article of Dissolution is a form filed with the state certifying that you are dissolving the business entity. This removes any liabilities by the state for annual registration fees and taxes.

While every state is different, many require you to file the form online just as you filed your registration online. Some require a fee to file dissolution paperwork although the fee is usually minimal. There may also be a waiting period before you get your final certificate for dissolution.

The exact guidelines for how to file the paperwork and what to include will be on the Secretary of State’s website.

Processing times vary, but if your company is in good standing, you’ll likely wind up with an approval in a week or so.

9. Terminate employees

The way and timing of letting employees go may depend on how long it takes you to dissolve your LLC. You may have to first wind down business contracts and other matters. However, any remaining employees should be let go when you formally file the paperwork.

This means giving them any severance packages, recommendation letters and outlining how they can obtain benefits while looking for other work. This will include filing for unemployment and how to keep health benefits until they return to work.

You need to make this as seamless as possible so they can move on quickly into other employment. That may mean having a list of suitable jobs nearby ready to give to them in their exit package.

You will pay your final payroll tax once you’ve said goodbye to your last employee.

10. Distribute remaining assets

One of the final things you will do in dissolving your LLC is to distribute any assets. Assets include profits, money in other holding or stock accounts, land, and equipment. Typically, dissolution follows the sale of non-monetary company assets like land, equipment, inventory, and stocks so you should have all cash at this point.

This is assuming there is profit after all taxes and debts are paid.

11. Final miscellaneous items

Many little details exist to close a business. You must contact local and state authorities to let them know you no longer need business licenses or permits. That shouldn’t involve any more payments as long as you were up-to-date before.

With all financial matters taken care of, one of the final steps in dissolving your LLC is closing all the business bank accounts. That may involve taking some paperwork to the bank but is a pretty straightforward process.

The final step to closing your LLC business is filing to end your Federal Employee Identification Number and your State Tax Identification number. This is typically a written request.

Consider hiring a dissolution company

Just as there are many commercial companies that help you incorporate your business, there are companies that can help you dissolve it. Many times the same companies that got your FEIN or helped you pick a business name also help file all the paperwork for dissolution.

There are advantages and disadvantages of hiring a professional to do the task. The advantages are it will be done to the letter with nothing overlooked and it will take the stress off of you.

The disadvantages are that it takes you out of the loop and you may want more control. Plus, it will cost some and your business might need its assets to pay debt and distribute what board members expect.


What if my LLC was never functional?

An LLC that never operated still must follow all of these guidelines, especially those listed in the LLC operating agreement.

What if we didn’t have an operating agreement that outlines dissolution?

LLC members that didn’t create an operating agreement must follow state laws where it is located.

What if my business operates in several states?

You will file your IRS tax return and all state tax returns. You will need to settle all debts for every state, end all contracts and then file for dissolution in every state where your business is located.

Can my LLC be dissolved involuntarily?

Yes, your LLC can be automatically dissolved in two separate ways. The state may administratively dissolve it if you fail to renew your registration. States have different requirements and dates for when you pay the fee, so check in your state.

Your LLC can also be automatically dissolved by a court, known as judicial dissolution. Usually, the CEO will file for a request because either the board is deadlocked on dissolution, there’s been some type of misconduct, or the board can’t agree on how the business is supposed to work on a daily basis.

Do I need a lawyer to dissolve my LLC?

No law requires business owners to use a law firm but you may want to consult one depending on your situation. A lawyer may be able to guide you through troubling waters like dealing with board members or fulfilling projects until you are closed. A lawyer may also be able to help negotiate contractual issues and employee severance packages.

What’s the difference between a cancellation and a dissolution?

A cancellation is what the Secretary of State does to approve your paperwork and remove any liability of the business along with your powers, privileges, and rights. Most states issue a Certificate of Cancellation upon approval. A dissolution is what you and the board members do to work through the process of ending the business.