Do I Need to Notify the IRS If I Close My Business?
Filing a final return is required when dissolving any business entity.
Dissolution Status
Articles Filed & Confirmed
Yes, you must inform the IRS about the dissolution by filing the final tax returns and checking the "final return" box. Depending on your entity type, you'll use:
- Form 1065 — for multi-member LLCs taxed as partnerships
- Form 1120 — for C corporations
- Form 1120S — for S corporations
Single-member LLCs typically report on Schedule C of the owner's personal return. We recommend consulting with a CPA before dissolving to ensure all tax obligations are properly settled.
How Much Does It Cost to Dissolve an LLC?
The cost to dissolve an LLC varies by state and situation. Here are the main cost components:
Filing Fees
State filing fees for the Articles of Dissolution typically range from $20 to $200. The exact amount depends on your state and entity type.
Service Fee
You may need professional assistance to ensure all steps are completed correctly. StartBrandz's $149 service fee covers preparation and filing — the state fee is passed through at cost.
Additional Considerations for LLC Dissolution
Several other factors need to be considered when closing an LLC:
Canceling Licenses and Permits
Be sure to cancel all business licenses and permits to avoid future liabilities. This includes state business licenses, local permits, sales tax permits, and any industry-specific licenses.
Notifying Creditors and Stakeholders
Inform creditors, customers, and other stakeholders about the dissolution. Providing advance notice allows them to submit any final claims against the business before you distribute remaining assets.
Record-Keeping Requirements
Maintain records of the dissolution process for future reference, including final tax returns and accounts. Most experts recommend keeping business records for at least 7 years after dissolution.
Frequently Asked Questions About Dissolving an LLC
1. What Is the Difference Between Dissolving and Terminating an LLC?
Dissolving involves closing the LLC and settling its affairs while terminating is the final step in which the LLC ceases to exist as a legal entity. Dissolution precedes termination.
2. How Do You Close an LLC?
Closing an LLC involves member agreement, filing Articles of Dissolution with the state, winding up affairs by settling debts and distributing assets, and then notifying the IRS via a final tax return.
3. Do I Need to Notify the IRS if I Close My Business?
Yes, you must notify the IRS by filing your final tax returns and indicating that they are the final returns. Check the 'final return' box on Form 1065, 1120, or 1120S as applicable.
4. How Much Does It Cost to Dissolve an LLC?
The cost varies by state but typically ranges from $20 to $200 in state filing fees, plus StartBrandz's $149 service fee. Some states may have additional fees for overdue filings.
Conclusion: Properly Dissolving an LLC
Dissolving an LLC involves several important steps to ensure compliance with state laws and avoid future liabilities. By following the correct procedures — from internal agreement and filing Articles of Dissolution to winding up affairs and notifying the IRS — you can close your business cleanly and protect yourself from future obligations.
Dissolve Your LLCKey Takeaways
- ✓The necessary steps, costs involved, and legal requirements if you're ready to close your company.
- ✓The differences between dissolving and terminating an LLC.
- ✓The steps required to dissolve your business — from internal agreement and decision-making to winding up affairs.
- ✓Whether you need to notify the IRS if you close your business.
- ✓The costs associated with closing your LLC.
- ✓Additional considerations for closing your LLC, like canceling licenses and permits, notifying creditors, and keeping records.
- ✓Frequently asked questions about dissolving your LLC.
