Whether your business has reached its natural end, you’ve sold it (CONGRATS!), or you’ve decided to pursue other ventures, it is crucial to take the necessary steps to properly close your LLC.
Closing your business doesn’t need to be overwhelming or difficult.. Follow these steps to help ensure you have officially closed all the doors and are leaving nothing left open for future problems.
In this guide, we’ll walk you through the seven essential steps to smoothly and efficiently close your LLC.
Steps to Close Your LLC
- Close payroll or sales tax related accounts
- Pay any final bills or expenses
- Pay taxes owed
- File final return
- Dissolve the business with the state.
- Cancel your EIN
- Keep all records
1. Close Payroll and Sales Tax Accounts
If you run payroll the first thing you need to do is cancel payroll services and close any employment tax accounts with the state. This is a very important step so the state doesn’t think you failed to file future reports.
You’ll also need to make any final federal employment tax payments.
Before you close everything, make sure you have filed your final payroll and all your employees are taken care of.
You’ll also need to close a sales tax account if it applies to your business. Without the closure of the account, the state will still expect your regular filings. Once the account is closed, the state knows to stop expecting any filings from your LLC.
2. Pay any final bills or expenses
Make sure to close out any final bills including lawyers, contractors, etc. You’ll need to finalize
any and all bills for the business with any funds left in the bank account.
Once you have paid all your final bills, you can close any business bank accounts and credit cards.
This is an important step to know that know fraudulent charges appear on your
business credit card or bank account.
3. Pay taxes owed
You’ll need to at the very least estimate any taxes you will owe for the tax year you close your LLC.
Remember that the US has a pay-as-you-earn tax system. If you had net profit from your business, then you should make an estimated payment to cover your self-employment AND income taxes for those profits.
4. File final return
Once the year comes to a close, it’s time to file your final business tax return. Depending on the tax treatment of your LLC, this can be a final Schedule C for the sole proprietor,
a final partnership return or even a final S Corp tax return.
No matter what, make sure you file a final return.
5. Dissolve the business with the state
Once the final tax return has been filed, you can dissolve your LLC with the state. This usually requires a final payment to file dissolution documents with the secretary of state. Make sure you go directly to the state website to file these documents. You can do this yourself!
It could also mean getting a tax clearance letter in order to do this. If your LLC is in Texas, this applies to you! Whatever applies to your state is what you’ll need to do. Again, go directly to the state website to learn the exact steps necessary for closing an LLC in that state.
6. Cancel your EIN
You’re almost there. You closed the tax and employment accounts, the business is dissolved with the state and now it’s time to cancel your EIN with the IRS.
This is an important step to let the IRS know your business is closed and they should no longer expect a tax return using that EIN.
To do this, you will need to compose and mail a written letter to the IRS that includes the legal entity name, the EIN, the business address and the reason for the closure.
7. Keep all records
This is the most important step by far. You know how you completed all the tasks like dissolving the LLC with the state, filing the final return, closing accounts? Document and
keep all records for every step along the way.
Those of you who know me know I’m all about keeping good records. It’s so important. Keep everything related to the closure!!!
Yes. That means you need to keep every document filed, every invoice paid, dissolution paperwork, bank account statements, tax return filed, etc.
Let’s repeat that. Keep EVERY document for your business. You can keep them electronically. Utilize the cloud to store these documents should you need them in the future.
Congrats! You did it! You have successfully closed your LLC and you can move on to the next venture whatever that may be!
