Closing a US LLC: what the state and the IRS still expect from you

Many companies do not die, they are abandoned. The owner stops trading, closes the bank account and considers the matter settled. The state, meanwhile, keeps counting.

Two years later the same person discovers unpaid franchise tax, late penalties, a company in default, and sometimes a letter from the IRS about a return that was never filed. Closing properly takes a few hours; not closing costs years.

Why walking away does not work

An LLC exists as long as it sits on its state’s register. That register does not know you have no clients left. The Annual Report and franchise tax remain payable, and non-payment costs the good standing status before it leads to administrative dissolution.

That administrative dissolution does not erase what is owed. On the contrary it leaves an unfavorable record, and reinstating the company later means paying the full arrears.

What a clean closure involves

The state only records a clean dissolution for a company whose obligations are extinguished. Unpaid suppliers, contracts still running or uncollected receivables do not vanish with the company: they can block the dissolution or resurface long after the closing.

How what remains is distributed matters just as much. The assets, cash included, go to the owner, and that allocation has to be documented, since it is what the IRS will find in the final federal return.

The formal dissolution goes through filing the Articles of Dissolution, or the equivalent document depending on the state, and requires the taxes due at that date to be paid. Some states refuse to record the dissolution while an Annual Report is missing.

The cost of this step depends on the state. Wyoming charges around €60 to file the articles of dissolution, Delaware around €200 plus the current year’s franchise tax, and New Mexico asks for a simple signed form for a few dozen euros. Then allow anywhere from a few days to three weeks for the register to show the company as dissolved, and keep the certificate: it is what will prove to your bank, your providers and your tax authority that the company no longer exists.

The final return, not to be forgotten

The closing year gives rise to one last federal filing, the same as the previous ones but marked as final. For a company owned by a single foreign person, that is Form 5472 with the pro forma 1120.

If years are missing, it is better to bring them up to date before closing. Our article on a late Form 5472 covers the risks and the penalties. A dissolution does not settle a filing history.

Closing the EIN file

The EIN is never reassigned and cannot truly be canceled, but the related account can be closed with the IRS. As long as it stays open, the IRS considers that the company still exists and keeps expecting its returns, with the $25,000 penalty that comes with each missing 5472.

The sequence matters too: the IRS expects every return due to be filed before it closes the account, and a closing request received while a return is missing reopens the file instead of ending it. That is why LLC Place handles the EIN closure in the same file as the final return.

Dissolve or keep dormant: the question to ask first

Before dissolving, ask yourself whether you might come back. In Wyoming, an LLC with no activity costs a €60 Annual Report every year, the registered agent, and a Form 5472 that stays due even with no revenue. If you expect to restart a project within twelve months, keeping the company alive costs less than closing it and forming another: a new EIN, a new bank account and new Stripe or Amazon accounts can all be obtained again, but with the same verification delays as on day one.

If no project is in sight, dissolve without waiting for the end of the year. States count by calendar year: a company still on the register on January 1 owes the Annual Report and, in Delaware, the full year’s €400 franchise tax, even if it is dissolved on January 2.

The details people forget

The registered agent must be terminated explicitly, otherwise the annual invoice keeps coming. Bank and payment accounts are closed once the last sums are collected. Sales tax registrations obtained in some states are closed separately, as our article on nexus explains.

Finally, keep your documents. Articles, returns, statements and proof of dissolution are kept for several years: that file is what will answer a question from your local authority long after the closing.

And if you only want to change state

Dissolving is not always necessary. Some states accept a redomestication that keeps the company and its history, avoiding the need to recreate accounts and contracts. Prepare the move with our state comparison in hand.

How LLC Place handles it

For the companies we administer, we track the deadlines while the business is active, then prepare the closing in the right order: bringing late reports up to date, filing the dissolution with the state and the last return marked as final, then closing the file with the IRS.

And if you are starting a new project, the next company is formed while the old one closes, with no period in which you have no structure to invoice through.

Frequently asked questions

Can I dissolve an LLC that still owes franchise tax?

Generally no. Most states require the taxes to be paid and the late reports filed before recording the dissolution.

Do I need a lawyer to dissolve?

For a simple company with no partner and no litigation, the file is mostly administrative, but it involves both the state and the IRS, and one forgotten document is enough to leave an obligation open. LLC Place handles it from €199: dissolution with the state, final Form 5472 and deactivation of the EIN, with state fees at cost. A lawyer only becomes useful if there is a disagreement between members or an ongoing dispute.

How long does it take to dissolve an LLC?

From a few days to three weeks for the state register, once the reports are up to date. The federal side follows the calendar of the final return for the closing year, and the EIN account can only be closed after that. LLC Place coordinates both sides so that nothing is left open.

What happens if I leave my LLC without dissolving it?

The state strikes it off after one or two years of non-payment, but the unpaid reports and taxes are still owed, and the IRS keeps expecting a 5472 every year, with its $25,000 penalty for each missing return. Being struck off is not the same as being closed.

How much does dissolution cost with LLC Place?

Dissolution is available from €199, including filing the articles of dissolution with the state, the last IRS return marked as final and closing the EIN file. State fees come on top, depending on the company’s state.