How to Close an LLC Properly: State and IRS Steps

Closing an LLC involves processes at two levels: the state level, where the company was formed, and the federal level, where it files with the IRS. Stopping billing does not close either one. As long as the entity remains registered, the state may continue to expect reports and fees, and the IRS may continue to expect returns.

In this guide, we explain the order we usually see in practice, what depends on each state, and what the official sources say. This is not a guide to opening a company: it is a list of everything that needs to be properly closed when you decide to stop.

Before you begin: what "closing" really means

There are three different things that are often confused:

• Dissolve: the internal decision to terminate the company, according to its operating agreement or state law.
• Wind up (winding up): collect outstanding amounts, pay debts, and distribute whatever remains.
• Cancel: the filing with the state that removes the entity from the registry.

Delaware law, for example, provides that an LLC is dissolved and its affairs are "wound up" when one of the events established in the agreement occurs or when the members approve it in the proportion required by law, and it separately governs winding up and the distribution of assets (Delaware Code, Title 6, Chapter 18, Subchapter VIII). The certificate of formation is canceled once that winding up is complete (§ 18-203).

We cite Delaware because its law is public and easy to verify, not because it is necessarily your case. Each state has its own law, forms, and fees.

Step 1: make and document the decision

The first step is not filed anywhere: it is documented. Review the LLC's operating agreement and follow what it says about how dissolution is approved, what majority is required, and what written record must be kept.

If there is no operating agreement, state law applies. In Delaware, unless the agreement provides otherwise, voluntary dissolution by the members requires the vote or consent of members who own more than two-thirds of the interest in profits.

Keep the signed minutes or consent. This is the document that later explains why operations stopped and as of what date.

Step 2: wind up before making distributions

Winding up is the part that prevents the most problems. It involves:

• completing or canceling contracts, subscriptions, and recurring services;
• collecting outstanding invoices and closing open disputes;
• paying vendors, creditors, and, if applicable, employees or contractors;
• retaining the accounting records for the period.

The order matters. Delaware law provides that, during winding up, assets are allocated first to creditors and only afterward to members. Distributing money to members while leaving debts without a provision for payment is precisely the type of decision that may ultimately be disputed on a personal basis.

If you had employees or paid contractors, the IRS notes on its Closing a business page that there are specific reporting and information-return obligations for those payments in the year of closing.

Step 3: close the state side

This is where the rules vary the most. Depending on the state, you may be required to:

• file a dissolution, cancellation, or termination form;
• be current on annual reports and state fees;
• obtain a certificate from the state's tax authority confirming that there are no outstanding debts;
• pay a filing fee.

None of the items on this list is universal, which is why we do not provide figures: each state publishes its own fees and timelines, and they change. Verify them with the Secretary of State or equivalent agency where the company was formed, and also review the states where the LLC was registered as a foreign company, if applicable, because they usually require a separate withdrawal.

Keep the registered agent active until the cancellation is accepted: it remains the official address for receiving notices while the entity exists.

Step 4: file final returns with the IRS

The IRS is clear on one point: you must file a final return for the year in which the business closes, and the type of return depends on how the company is classified for federal tax purposes. On its closing page, it notes that an LLC is an entity created under state law and that, for federal purposes, it may be treated as a partnership, a corporation, or an entity disregarded as separate from its owner.

This leads to different consequences for final returns, the schedules accompanying each one, and any information forms that may apply. That classification should not be guessed, so this is where we recommend sitting down with a tax preparer before filing anything.

On that same page, the IRS also lists other steps for federal closing: paying taxes owed, reporting payments to contractors, and retaining records. Regarding record retention, keeping contracts, invoices, and books after closing remains prudent.

Step 5: deactivate the EIN account

Many people search for how to "cancel the EIN." The IRS explains that it cannot cancel it: once assigned, the EIN is that entity's permanent federal number and is not reused. What you can do is deactivate the account by sending a letter containing the EIN, the entity's legal name, its address, the EIN assignment notice if you still have it, and the reason (IRS — If you no longer need your EIN).

The same page adds an important condition: if you made tax payments, owe business taxes, or received a notice to file a return, you will need to file all outstanding returns and pay what is owed before the IRS deactivates the EIN.

If you have never worked with this number, our guide on what the EIN is and how to apply for it explains what it is used for and how it appears in filings.

Step 6: close operational accounts last

Bank accounts, payment processors, billing gateways, domains, and tools should be closed when there is nothing left to collect or pay. Closing the account too early is one of the most common ways to complicate the closing process: a refund, recurring charge, or hold on funds may appear weeks later.

Each bank and processor has its own procedure and timelines. Neither depends on the state or the IRS.

Mistakes we see frequently

• Assuming the company is closed because it stopped billing.
• Distributing the remaining money before paying debts.
• Canceling with the state and forgetting the final return for the tax year.
• Terminating the registered agent before the cancellation has been accepted.
• Losing access to email or documents just when a notice arrives.

If you would rather not do it alone

We handle the administrative side of closing: organizing the documentation, preparing state filings, and coordinating the steps with your tax preparer. You can see how we work through our services.

If you are considering the opposite—keeping the company and organizing its annual compliance—you can review our plans.

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At Maera, we are an administrative service: we are not a law firm or accounting firm, and we do not provide legal, tax, or investment advice. Each case should be validated with a professional and with the official source for the state and tax authority that apply to you.