How to Close a Business

Closing a business means formally winding it down in a set order: vote to close, notify and pay creditors, handle employees and final payroll, file final tax returns, then file dissolution paperwork with the state. Skip a step or do them out of order and you can end up with lingering tax bills, personal liability exposure, or a business that's still "open" on paper years after you've moved on. This guide walks through the full sequence for any entity type — with links to entity-specific and topic-specific guides along the way.

LLC or corporation? The order is the same, the details differ

Whether you're running an LLC or a corporation, you're working through the same eight-step sequence below. What changes is the formality. An LLC is usually wound down by a member vote under your operating agreement, with pass-through taxes and no extra IRS notice beyond your final return. A corporation adds a board resolution, a separate shareholder vote, a more formal liquidation process, and IRS Form 966. If you're running a corporation, read how to dissolve a corporation alongside this guide for the details specific to that entity. If you're closing a single-member LLC, the process is lighter still — see single-member LLC dissolution.

The 8 steps to close a business

1. Make the decision official.For an LLC, hold a member vote following whatever threshold your operating agreement sets, and put the resolution in writing. For a corporation, the board adopts a resolution recommending dissolution, then shareholders vote to approve it — usually a majority or two-thirds, depending on your state and bylaws. Keep the signed vote or resolution; you'll reference it in later filings.
2. Notify creditors and settle debts.Send written notice to known creditors and, in some states, publish notice for unknown claimants. Pay off or formally resolve outstanding loans, leases, and vendor contracts before distributing any remaining money or assets to owners — this is also what protects you from personal liability claims tied to unpaid obligations.
3. Handle employees — final pay and required notices.Final paycheck deadlines vary by state and by whether you laid employees off or they resigned; some states require the final check on the last day worked, others allow until the next regular payday. Check final paycheck laws by state before you let anyone go. You'll also need to issue final W-2s and, if you have 100+ employees or meet other thresholds, provide WARN Act notice before a mass layoff or closing.
4. Cancel licenses, permits, registrations, and your registered agent.Cancel local business licenses, sales tax permits, and any professional or industry-specific registrations. Formally cancel your registered agent along with the entity — it doesn't end automatically just because you stop operating. If you're not sure why that role exists in the first place, see what is a registered agent.
5. File final federal and state tax returns.File your last federal return — Form 1065 or Schedule C for an LLC, Form 1120 or 1120-S for a corporation — and check the "final return" box. Do the same for state returns. If you're a corporation, also file IRS Form 966, Corporate Dissolution or Liquidation, within 30 days of adopting your dissolution resolution; LLCs don't have an equivalent requirement.
6. File Articles or a Certificate of Dissolution with the state.This is the filing that actually closes the entity in the state's records — submit it to the Secretary of State (or equivalent agency) where you formed the business, plus any state where you're registered as a foreign entity. Some states, including California, New York, and Georgia, require a tax clearance certificate before they'll process it. Filing fees typically run $20 to $200; for the full cost breakdown, including back taxes and professional fees, see how much it costs to dissolve an LLC. If you're closing an LLC, the exact form and process depends on your state — start at dissolve an LLC by state.
7. Close bank accounts and your EIN account with the IRS.Once final payments have cleared, close your business bank accounts. Notify the IRS in writing to close the EIN account tied to your business — the number itself is never reissued to anyone else, but the active account is closed so no further filings are expected against it.
8. Keep your records.Hold on to tax returns, the dissolution filing, meeting minutes or resolutions, and financial records for at least seven years. If a creditor, former employee, or the IRS has a question later, this is what you'll need to answer it.

Why the order matters

Distributing assets before creditors are paid, or filing dissolution paperwork before final taxes are settled, are the two mistakes that cause the most trouble after the fact. States generally won't accept a dissolution filing if you owe back taxes, and paying yourself or other owners before creditors are made whole can expose you personally in some states. Working through the steps roughly in the order above — decision, creditors, employees, licenses, taxes, state filing, accounts, records — keeps you from having to unwind a mistake later.

If you're wondering whether any of this is actually optional — it isn't. An LLC or corporation that just stops operating without filing keeps accruing state fees and franchise taxes in the background. See what happens if you don't dissolve an LLC for exactly what that costs over time. And if the business never really got off the ground, there's a simpler path — see how to close an LLC you never used.