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, 5:29pm
As of January 1, 2024, most small businesses in the U.S. are required to file Beneficial Ownership Information (BOI)reports with the Financial Crimes Enforcement Network (FinCEN). This new federal mandate was introduced under the Corporate Transparency Act (CTA) to increase business transparency and reduce financial crimes.
Failing to file BOI on time can result in serious penalties—even for small businesses.
What Is Business Dissolution?
Business dissolution is the legal process of formally closing a registered business entity with the state.
- It terminates the company’s legal existence.
- Prevents ongoing obligations like annual reports or taxes.
- Protects owners from future liabilities.
Who Needs to File a Dissolution?
Entities that must file for dissolution include:
- Limited Liability Companies (LLCs)
- Corporations (C-Corp or S-Corp)
- Nonprofits
- Limited Partnerships
Sole proprietors without state registration typically do not need to file.
When Should You Dissolve a Business?
Consider dissolution if:
- The business has ceased operations permanently.
- There’s no intention to resume business activities.
- You’re restructuring or forming a new entity.
- You want to eliminate ongoing compliance obligations.
How to Dissolve a Business
- Obtain Approval
Secure consent from members or shareholders as outlined in your operating agreement or bylaws. - File Dissolution Documents
Submit Articles of Dissolution to the Secretary of State in your formation state. - Settle Financial Obligations
Pay off debts, taxes, and obligations to creditors. - Notify Stakeholders
Inform employees, customers, vendors, and other stakeholders of the closure. - Cancel Registrations and Permits
Terminate business licenses, permits, and registrations at local, state, and federal levels. - Close Financial Accounts
Shut down business bank accounts and credit lines. - File Final Tax Returns
Submit final federal, state, and local tax returns, marking them as “final.” - Maintain Records
Keep dissolution documents and records for future reference.
Filing Costs and Timelines
- State Filing Fees: Typically range from $25 to $200, varying by state.
- Processing Time: Generally 1 to 3 weeks, depending on the state.
- Tax Clearance: Some states require a tax clearance certificate before processing dissolution.
Consequences of Not Dissolving Properly
- Continued Compliance Obligations: The business remains liable for annual reports and taxes.
- Accrued Penalties: Failure to file can result in fines and penalties.
- Personal Liability: Owners may be personally liable for business debts and legal actions.
- Administrative Dissolution: The state may involuntarily dissolve the business, leading to additional complications.
What to Do Before You File
Review Governing Documents: Check your operating agreement or bylaws for dissolution procedures.
Settle Debts: Ensure all financial obligations are paid.
Notify Stakeholders: Inform all relevant parties of the impending closure.
Cancel Licenses and Permits: Terminate all business-related licenses and permits.
File Final Taxes: Submit all required final tax documents.
Maintain Records: Keep all documentation related to the dissolution process.
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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.