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Dissolution

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Dissolve your US company cleanly

Stopping operations doesn't end a company. Until it is formally dissolved or cancelled with the state and its final tax returns are filed, annual reports, state taxes and penalties can keep building up. Firmlane prepares and files your state dissolution or cancellation, in the right order for your state, with the state fee shown separately from the Firmlane fee.

  • Articles or certificate of dissolution or cancellation
  • A clear path through winding up and final returns
  • State fees shown separately from Firmlane fees
  • Filed copy stored in your dashboard
Get started See the steps

Inactive is not the same as closed

A company that stops trading but isn't formally closed usually keeps its obligations. Delaware says taxes continue to accrue on a corporation until a filing that officially terminates its existence is received and filed, and that failing to formally close the entity results in penalty and interest charges. In California, the $800 LLC annual tax is due every year, even if the LLC isn't doing business, until the LLC is cancelled.

The path

How a US company is usually closed

The order and details vary by state and entity type, but most closures follow these stages.
  1. 01

    Approve the decision

    The owners approve the dissolution as your operating agreement, bylaws and state law require. In Delaware, for example, a corporation's board adopts a resolution and the stockholders vote on it.

    Internal

  2. 02

    Wind up the business

    Collect what you're owed, pay or provide for debts and obligations, notify creditors where state law provides for it, end contracts, and distribute any remaining assets to the owners.

    Winding up

  3. 03

    Bring state filings current

    Some states require overdue reports and taxes to be cleared first. A Delaware corporation, for example, can't be dissolved until its franchise taxes are paid and its annual franchise tax reports are filed, including a final report.

    State

  4. 04

    File dissolution or cancellation

    File the state's closing document: articles or a certificate of dissolution, or a certificate of cancellation, depending on the state and entity type. A state filing fee usually applies.

    State filing

  5. 05

    File final tax returns

    File a final federal return for the year you close and check the "final return" box near the top of the first page. Corporations that adopt a plan to dissolve also file Form 966. States may require final returns too.

    Tax

  6. 06

    Close your IRS business account

    Send the IRS a letter with the business's complete legal name, EIN, address and the reason you want to close the account. The IRS can't close it until all required returns are filed and taxes paid.

    IRS

  7. 07

    Tie up loose ends

    Close bank and payment accounts, cancel licenses and registrations in other states, end optional services such as registered agent under their terms, and keep your records.

    Final

Terms you'll see

Dissolution, cancellation and administrative dissolution

These words are used differently from state to state. Here is what they generally mean.

  • Voluntary dissolution

    What it means
    The owners formally decide to end the company and file articles or a certificate of dissolution
    Who starts it
    The company
    What follows
    The company winds up its affairs. A dissolved Delaware corporation continues for 3 years for winding up and claims

  • Certificate of cancellation

    What it means
    A filing that ends the entity's existence on the state record, common for LLCs
    Who starts it
    The company
    What follows
    In Delaware, it is filed once the entity has dissolved and finished winding up

  • Administrative dissolution or revocation

    What it means
    The state ends the company's active status, for example for missed reports, unpaid taxes or no registered agent
    Who starts it
    The state
    What follows
    Debts and filing obligations may remain. Reinstatement may be possible for a limited time

  • Withdrawal or surrender

    What it means
    Ending a registration in another state where the company qualified to do business
    Who starts it
    The company
    What follows
    Needed in each state where you registered, in addition to closing in your home state

Letting a state administratively dissolve your company is not a clean exit. Penalties can keep building and the company's record shows it was dissolved by the state.

Taxes

Final returns and your EIN

The IRS says you must file a final return for the year you close your business. On the return, check the final return box near the top of the front page, below the name and address. Which return that is depends on how the company is taxed: Form 1065 for a partnership, Form 1120 or 1120-S for a corporation, or the owner's own return for a single-member LLC that is disregarded. A foreign-owned single-member LLC may also need its final Form 5472.

If you had employees, you also file final employment tax returns, make final federal tax deposits and issue Forms W-2. Contractor payments are reported on Form 1099-NEC where required.

Your EIN is the permanent federal taxpayer identification number for your business. To close your IRS business account, send a letter with the business's legal name, EIN, address and reason for closing, and include a copy of your EIN assignment notice if you have it.

State tax agencies often have their own closing steps. California, for example, asks you to file your final return with the final return box checked and to file the dissolution or cancellation with the Secretary of State within 12 months of filing that final return.

  • Check the final return box on your last federal return
  • Corporations that adopt a dissolution plan file Form 966
  • The IRS closes the account only after all returns are filed and taxes paid

Before and after filing

Don't leave these open

Close or cancel

  • Business bank accounts, cards and payment processor accounts
  • Registrations to do business in other states
  • Business licenses and permits
  • Subscriptions, domains and contracts in the company's name
  • Registered agent service, under its terms, once your closing filing is done

Keep

  • Copies of your final returns and the filed dissolution or cancellation
  • Owner approvals, such as consents and resolutions
  • Employment tax records for at least 4 years
  • Property records until the limitation period for the year you dispose of the property ends

With Firmlane

How we help you close

  • Outstanding items first

    Some states won't accept a dissolution while reports or taxes are overdue. We tell you what your state requires to be cleared before the closing filing goes in.

  • State closing filing

    We prepare the dissolution or cancellation document for your state and entity type, for signature by an authorized person, file it with the state and store the filed copy in your dashboard.

  • Fees shown separately

    The Firmlane fee is shown before you pay. The state's dissolution fee and any unpaid state fees or taxes are separate.

  • Registered agent until the end

    Keeping your agent in place until the closing filing is accepted means you can still receive official notices. The service then ends under its terms.

  • Final returns

    Tax filings are not part of the dissolution service. Your final federal return can be prepared by qualified tax professionals through Firmlane's tax preparation.

    Tax preparation

  • A clear order of steps

    Closing in the wrong order can cost money, for example cancelling your agent before the state filing goes in.

General information only

This page is general information, not legal or tax advice. Dissolution rules, creditor notice requirements and tax obligations vary by state and by how your company is taxed. Before you close a company, especially one with debts, employees or assets, consult a licensed attorney or qualified tax professional. Firmlane is not a law firm and is not affiliated with any government agency.

Official sources

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Ready to close your company properly?

Firmlane prepares and files your dissolution or cancellation with the state. The state fee is shown separately from the Firmlane fee.

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$0 Firmlane service fee on eligible formations. You pay the state filing fee, shown before you pay.