As the end of the year approaches, many business owners start reviewing their company’s performance and future prospects. For some, this is the right time to make a strategic decision to wind down operations.
If you’re considering dissolving your LLC, acting before December 31st can help you avoid unnecessary tax and compliance obligations in the new year. Here’s a step-by-step breakdown to help ensure a smooth, compliant exit.
1. Vote or Consent to Dissolution
LLC dissolution typically starts with a formal agreement among members. Check your operating agreement for specific procedures or voting requirements. Remember, your operating agreement is the legal document that outlines how your LLC will be run. You can learn more about operating agreements here. If there’s no agreement, state law will govern how dissolution should be approved.
2. File Articles of Dissolution with the State
Once members agree to dissolve, you must file Articles of Dissolution (sometimes called a Certificate of Termination) with the state where your LLC was formed. This officially notifies the state that your business is ceasing operations.
3. Resolve Outstanding Debts and Obligations
Before winding down completely, pay off any outstanding debts and fulfill contractual obligations. Notify creditors, close business bank accounts, and cancel business licenses and permits.
4. Notify the IRS and State Tax Agencies
Filing final tax returns is critical. Mark the returns as “final” and make sure all payroll, sales, and income taxes are properly reported. You’ll also need to cancel your EIN with the IRS and handle any remaining state tax filings.
5. Distribute Remaining Assets to Members
After all debts and taxes are paid, any remaining assets can be distributed to LLC members based on the ownership structure outlined in your operating agreement or state default rules.
6. Maintain Records and Documentation
Keep detailed records of the dissolution process, including the final tax filings, state dissolution approval, and communications with creditors. These may be needed for future reference or audits.
Why Year-End Matters
Dissolving before December 31st can save you from owing state annual report fees, franchise taxes, or registered agent fees for the upcoming year. Many states don’t prorate fees, meaning even one day into the new year can trigger another full year of obligations.
Taking the time now to dissolve your LLC can spare you from extra costs and compliance headaches in the new year. Whether you’re wrapping up a side hustle, retiring, or moving on to a new venture, doing it the right way matters.
Keeping your LLC open but unsure how to close out the year properly? Check out our 2025 Year-End Compliance Checklist.
Need Help Closing Your LLC?
URA can help streamline your LLC dissolution. We’ll handle the paperwork, file with the state, and ensure all steps are followed correctly to avoid penalties. Contact us today to complete your dissolution before year-end deadlines.
