You close a US LLC in four steps. Payroll comes first if you have employees. Then the final income tax return, then the cancellation with your state, then the records you keep afterwards. The order below follows the one the IRS gives for a business that closes.
What do you file first?
Start with anyone you pay. If you had employees, the IRS asks for final payroll forms. On Form 941 or 944, check the box that tells the IRS your business has closed. On Form 940, check box "d" in the Type of Return section. You also give each employee a Form W-2 by the due date of your final Form 941 or 944.
Next comes the final income tax return. The IRS says you must file one for the year you close, and which form it is depends on how your LLC is taxed. The IRS notes that an LLC can be classified as a partnership, a corporation or an entity disregarded as separate from its owner. A multi-member LLC taxed as a partnership files Form 1065 and checks the "final return" box near the top of the front page.
Last, cancel the LLC with your state. Ask your state's business registry which cancellation form it requires and what it costs. The IRS also tells you to check your state responsibilities when closing a business, so do that before you assume the federal filings are the end of it.
Before you start, read Which AI buyers fit your company's records? and Dental practice valuation in the US.
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Which route applies to you?
- No employees, no debts. File the final income tax return, then cancel with your state.
- Employees. File the payroll forms and W-2s first, then the income tax return, then the state cancellation.
- Open debts or unpaid taxes. The IRS won't close your business account until every return is filed and every tax is paid. Settle those first.
What do you do with your records when you close?
Closing the LLC doesn't end your duty to keep records. The IRS says how long you keep a record depends on what it documents. You must keep your records as long as they're needed to prove the income or deductions on a tax return. Keep all records of employment taxes for at least four years.
Keep the records in one place and write a list of what's in it. If you sell the business, decide which records go to the buyer and which you keep. Weighing a sale instead of a closure? The succession checklist covers the handover side, and the estimate gives you a number to compare before you decide. For the full process from start to finish, see how it works.
What if you have debts?
Pay or settle the taxes you owe before you close the business account. The IRS won't close it otherwise. For other debts, the rules depend on your state and on how the LLC is set up. Ask a tax professional or an attorney who knows your state's LLC law before you distribute any money to owners.
Federal rules come from irs.gov.