Officially Close Your Business the Right Way
Follow the proper steps to legally dissolve and protect yourself from future liabilities
Staff Writer
Arorix Editorial Team
Updated: June 14, 2025
Shutting down a business isn’t as simple as locking the doors or taking your website offline. Whether you’re moving on to a new venture or wrapping things up for good, closing a business requires proper steps to avoid legal issues, tax surprises, or penalties down the road.
In this guide, we’ll walk you through how to officially dissolve your company the right way—so you can protect your reputation, maintain compliance, and leave things clean and closed on paper.
What Is Business Dissolution?
Business dissolution is the formal process of legally closing your company with the state. It officially ends your business’s existence and stops any future tax or compliance obligations.
Without proper dissolution, your business may still rack up fees, taxes, or penalties—even if you’re no longer operating. Whether you’re closing an LLC, corporation, or partnership, filing the correct paperwork ensures the government knows your business is no longer active.
Who Needs to File a Dissolution?
LLCs and Corporations: If your business was officially formed with the state, you must file dissolution paperwork to close it legally.
Multi-Member Businesses: You’ll typically need a vote or written agreement from all members or shareholders before filing.
Out-of-State Registered Businesses: If you registered in other states, you’ll need to withdraw or dissolve there too.
Even Inactive Businesses: Just because you’ve stopped operations doesn’t mean the state knows—filing is still required to avoid ongoing fees or taxes.
Sole proprietors and general partnerships usually don’t file dissolution forms, but they still need to cancel licenses and notify tax agencies.
When Should You Dissolve a Business?
You’re No Longer Operating: If your business has closed its doors, shut down services, or stopped generating revenue.
You’re Switching Structures: Moving from an LLC to a corporation (or vice versa) often requires dissolving the old entity.
Partnerships Ended or Owners Left: If members or partners leave and there’s no plan to continue.
Avoiding Fees & Penalties: If you don’t officially dissolve, your state may still charge annual fees, taxes, or penalties.
You’re Ready to Move On: Whether you’re starting a new venture or retiring, formal closure keeps your record clean.
How to Dissolve a Business (Step-by-Step)
Vote or Get Consent
For LLCs and corporations, get formal approval from members, shareholders, or partners—usually documented in meeting minutes or written consent.File Articles of Dissolution
Submit dissolution paperwork to the Secretary of State (or equivalent agency) where your business was formed. Some states call it a Certificate of Dissolution.Close State Registrations
If registered in other states, file a withdrawal or termination in each one to avoid future fees.Handle Final Taxes
File your final federal, state, and local tax returns. Be sure to check the “final return” box on IRS forms.Cancel Licenses & Permits
Contact your city, county, and state agencies to cancel business licenses, sales tax accounts, or any industry-specific permits.Notify the IRS & Get Tax Clearance (if required)
Some states require tax clearance from the IRS or state tax agency before approving your dissolution.Pay Off Debts & Distribute Assets
Settle outstanding bills, close business bank accounts, and distribute any remaining assets to owners as outlined in your operating agreement or bylaws.Keep Your Records
Save dissolution documents, tax records, and meeting notes in case of future audits or questions. Most states recommend holding them for 3–7 years.
Pro Tip: Don’t assume inactivity means you’re off the hook. Officially dissolving is the only way to stop ongoing legal and financial obligations.
Filing Costs and Timelines
Filing Costs & Timelines
State Filing Fees:
Usually range from $20 to $200, depending on your state. Some states process filings in just a few days, others take a couple of weeks.Additional Costs to Expect:
Attorney Fees: Around $100+ if you need legal help
Accountant/Tax Help: May cost a few hundred dollars for final returns or payroll closure
Publication Fees: Some states require a public notice, which can cost extra
Typical Timelines:
Online filing: Often processed in 3–10 business days
Mail-in forms: Can take 2–4 weeks or longer
Using a filing service: Adds 1–2 weeks for prep and handling
Bottom Line: Budget for $20–$200 in state fees and expect the full process to take 1–4 weeks depending on your filing method and state.
Consequences of Not Dissolving Properly
Ongoing Fees & Penalties: Your state may still charge annual report fees, franchise taxes, or late penalties—even if your business is inactive.
Loss of Good Standing: Failure to dissolve can lead to your business being marked as “delinquent” or “suspended,” damaging your legal and financial reputation.
Personal Liability: If you don’t formally close, you could still be personally liable for debts, lawsuits, or tax obligations tied to the business.
Tax Issues: The IRS and state tax agencies may expect returns or payments unless they’re officially notified your business has closed.
Blocked Future Filings: Leaving a business open on paper can delay or complicate forming a new business or registering in the same state again.
Bottom line: If you don’t shut it down right, your “closed” business can still cost you money—and come back to bite you later.
What to Do Before You File for Dissolution
Get Internal Approval: Hold a formal vote or get written consent from members, shareholders, or partners as required by your operating agreement or bylaws.
Check Your Operating Agreement or Bylaws: Follow the specific process outlined for dissolving the business.
Notify Employees and Contractors: Give proper notice, issue final paychecks, and close out any benefits or payroll accounts.
Settle Debts: Pay off outstanding bills, loans, and vendor balances.
Collect Outstanding Payments: Invoice and collect any remaining customer payments.
Cancel Leases and Subscriptions: End office leases, software contracts, and utility services.
Back Up Business Records: Save copies of contracts, financials, licenses, and employee records for future reference.
Inform Your Accountant: They’ll help you handle final tax returns and make sure you’re compliant.
Pro tip: Getting your books and internal records in order first makes the formal shutdown process smoother and faster.
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Looking for a Complete All-in-One Solution?
Best Overall Business Launch Solution
- EIN, docs, & custom branding included
- Access to Arorix OS™ business dashboard
- Website, CRM, and automation tools built-in
Properly dissolving your business protects you from future liabilities, closes the chapter cleanly, and sets you up to move forward with confidence.
Do I have to dissolve my LLC if I’m not using it?
Yes. Until you officially dissolve it with the state, your business remains active and may still owe fees or reports.
Can I dissolve my business myself?
Yes, but using a service can help avoid mistakes, ensure state compliance, and save time.
What happens if I don’t dissolve properly?
You may face late fees, continued tax obligations, or even personal liability for unresolved business matters.
How long does it take to process a dissolution?
Most states complete the process within 1–3 weeks, though some offer expedited options.
Do I need to cancel my EIN and business licenses too?
Yes. You should cancel your EIN with the IRS and close out any local licenses or permits to fully close your business.