{"id":4653,"date":"2016-04-04T10:47:37","date_gmt":"2016-04-04T15:47:37","guid":{"rendered":"https:\/\/ability-fl-prod.internetbrands.com\/ability-law\/smallbusiness\/closing-a-business\/necessary-steps-to-dissolve-your-company.html"},"modified":"2026-07-01T00:56:00","modified_gmt":"2026-07-01T05:56:00","slug":"necessary-steps-to-dissolve-your-company","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/closing-a-business\/necessary-steps-to-dissolve-your-company.html","title":{"rendered":"Essential Steps to Dissolving an LLC or Corporation"},"content":{"rendered":"\n
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Essential Steps to Dissolving an LLC or Corporation<\/h1>\n\n
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\n By Amber Sheppard, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Business dissolution is the formal legal process of closing a company and winding down its financial affairs. This procedure requires a business to notify employees, settle outstanding debts with creditors, and fulfill all remaining contractual obligations. Finally, owners must file final tax returns with the IRS, cancel existing business licenses, and submit official articles of dissolution to the state to avoid future legal and tax liabilities.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

One of the grim statistics of starting a\u00a0business is knowing that almost half of all small business<\/span> start-ups will\u00a0no longer exist within five years. According to the Small Business<\/span> Administration<\/span><\/strong><\/a> (SBA<\/span>), the reasons both big and small\u00a0businesses<\/span> fail are as numerous as the companies themselves. When a company shuts down, it can’t simply\u00a0close the doors one last time and send everyone home. It may take many months or even years to close a business.<\/p>\n

This timeline for dissolving or “winding down” a business gives business owners<\/span> some idea of what to expect if their business isn’t successful. No one wants to plan for failure, but business owners<\/span> should prepare for the worst as they work for success.<\/p>\n

The Dissolution Process<\/span><\/strong><\/h2>\n

The process of closing a business<\/strong><\/a> mirrors the process of opening one. Like starting a business, ending your business begins by ensuring everyone is on board with the dissolution of the business. If your company has articles of organization<\/span>, they should include a process for voting on dissolution. You may need to call a board of directors<\/span> meeting or make an announcement to shareholders.<\/p>\n

The rest of the dissolution process<\/span> will take time. The actual\u00a0amount of\u00a0time depends on your type of business<\/span> and the reason(s) for dissolution, but you can expect it to last at least several\u00a0months. Having a business checklist<\/span><\/a> can make the process easier.<\/p>\n

Notification of Employees<\/strong><\/h3>\n

The Federal Worker Adjustment and Retraining Notification<\/strong><\/a> (WARN) Act requires eligible employers to notify employees at least sixty days before mass layoffs or plant closings. The WARN Act does not apply to most small businesses<\/span>. Many states, such as California, have their own versions of the Act, which may be more restrictive than the federal act.<\/p>\n

All states have requirements on when employees must receive their final paycheck<\/span> following a business closure. In some states, it is the day of notification. Time your closing and notification so you can make payroll and meet all\u00a0other financial obligations as well.<\/p>\n

Notification of Creditors and Vendors<\/strong><\/h3>\n

Cancel contracts and leases according to their terms. For instance, if you have a lease on your building that requires you to give 60 days’ notice, you must give the landlord 60 days or risk losing any deposit plus paying costs for breaking the lease.<\/p>\n

Contracts for goods or services should have cancellation clauses. They may also have liquidated damages clauses for breach or early termination. As with notifying your employees, give yourself plenty of lead time to cancel any contracts before officially closing your business.<\/p>\n

Pay Final Federal<\/span> Taxes<\/strong><\/h3>\n

The IRS<\/span> has tax forms<\/span><\/strong><\/a> for the final year of a business. Limited liability companies<\/span> and corporations have their own forms for the final year. Employers need to file their final payroll taxes<\/span> and make final tax deposits<\/span>. After paying all taxes and closing all other business accounts, you must cancel your employer identification number<\/span> (EIN). You can’t do this until filing your final <\/span>tax return<\/span> with the IRS<\/span>.<\/p>\n

File <\/span>Articles of Dissolution<\/span><\/strong><\/h3>\n

If you filed articles of incorporation<\/span> to start your business, you must file <\/span>articles of dissolution<\/span><\/strong><\/a> to end it. File these documents at the Secretary of State<\/span>‘s office. Certain states require a state tax<\/span> clearance certificate before<\/em> dissolution documents can be filed. Under federal tax procedures, a corporation or LLC files the final <\/span>tax returns<\/span> with the IRS<\/span> within 3-4 months following dissolution.<\/p>\n

Cancel Business Licenses<\/span><\/strong><\/h3>\n

Cancel all business licenses<\/span> and permits under your business name<\/span>. Terminating business licenses<\/span> and agreements helps keep you in good standing<\/span> with other companies if you decide to establish a new business. Canceling permits and licenses can be time-consuming, depending on the nature of the license. You may need a certificate of dissolution<\/span> for city or state permits.<\/p>\n

Resolve All Financial Obligations<\/strong><\/h3>\n

Notify lenders<\/span> and other business entities<\/span> you do business with and arrange continued payment of outstanding loans. If you know your remaining assets<\/span> will not cover your business debts<\/span>, you may want to negotiate payment or forgiveness<\/strong><\/a> during your winding-up. As with canceling your business licenses<\/span>, this procedure may take longer than shutting down the business itself.<\/p>\n

After the Business Closing<\/span><\/strong><\/h2>\n

As you can see, closing a business is like juggling. None of these steps are complete until the others are. Although your dissolution is done once you file the final taxes and articles of dissolution<\/span>, you still need to keep some things open and active.<\/p>\n