How to Close a U.S. Company Properly

Closing a U.S. company involves more than stopping operations. This guide explains why proper dissolution matters and how to do it.

Alexandra Tokareva

August 15, 2025

Disclaimer

This information is for general purposes only and does not constitute legal advice. No attorney-client relationship is formed. We make no warranties regarding accuracy. Consult a qualified attorney for legal advice.

If your U.S. business is no longer active you still need to close it through the official process. Without it your company can keep generating taxes fees and penalties even with no income. This article explains the key reasons to dissolve your business correctly, the steps to take from state filings to federal tax forms, and what to do if your company was abandoned in the past but never formally closed.

Why You Should Dissolve Your Company the Right Way

If your U.S. company is no longer operating, you can’t just abandon it and move on. Legally, it still exists until you officially dissolve it at the state level and in many cases, with the IRS too.

If you don’t take the proper steps, your company will continue to generate obligations even without any income or activity. This can lead to:

Unpaid state fees, franchise taxes, and late penalties
IRS notices or fines for missing tax returns
Losing rights to your business name if the company is dissolved by the state
Extra costs and paperwork later if you want to resolve or close it properly

Closing your company the right way helps you avoid these issues and ensures there’s no unfinished business left behind.

Step-by-Step: How to Close a U.S. LLC or Corporation

1. Vote to Close the Company

For multi-member LLCs or corporations, formal approval is required. LLCs follow procedures set out in the Operating Agreement; corporations must record a board resolution and shareholder vote.

2. File All Outstanding Reports and Taxes

Before dissolution, most states require that you:

File any outstanding annual reports
Pay franchise or state business taxes
Submit any back tax returns to the IRS

Some states require a tax clearance certificate as part of the dissolution process.

3. File Articles or Certificate of Dissolution

To formally close your entity, submit a Certificate of Dissolution to the Secretary of State in your formation state. This document ends the company’s legal existence.

In some states, you may also need to submit filings in states where the business was registered as a foreign entity. Moreover, if your company has been administratively dissolved or is inactive, you may need to reinstate it first before filing for dissolution.

4. Close IRS and Federal Accounts

File a final federal tax return:

LLCs: Form 1065 or Schedule C
C-Corps: Form 1120 + check “final return” box

If the company had employees or payroll tax accounts, you may also need to file final employment tax forms and cancel the EIN. Corporations must file Form 966 (Corporate Dissolution) within 30 days of the board resolution.

5. Cancel Licenses and Accounts

Wind down the operations properly:

Close bank accounts
Cancel state or city business licenses
Withdraw sales tax registrations
Cancel insurance policies
Close payment processor or merchant accounts

Failure to do so may result in unwanted renewals or charges even after dissolution.

What If the Company Has Been Previously Abandoned?

If you stopped using your company years ago but never closed it officially, you will likely need to bring it back into good standing first. This means paying past fees and filing missing reports, then submitting dissolution documents. Some states allow for direct administrative cancellation, but many require formal reinstatement before winding down.