Now you should distribute the assets according to each member’s ownership proportion. For instance, if members have equal ownership (50-50), then each receives half of the assets.
Once everyone is in agreement, you need to file the form with the state that officially notifies the dissolution of the LLC. It’s advisable to attach this document with the signatures of all members who agreed to the closure.
5. Final Tax Filings
You should file the final tax returns for the LLC.
In the case of an LLC with two or more members, when filing final taxes, it’s important to indicate in the return that this will be the LLC’s last tax return to the IRS.
6. Final Steps
Close all bank accounts, insurance policies, and retain all records for up to four years.
Generally, the IRS has a three-year window for conducting audits, but when it comes to payroll taxes, they can audit up to four years back. It’s recommended to keep the documents for this period.
For an LLC with multiple members, the IRS can officially close the federal tax records of the LLC after taxes have been filed and the LLC has notified the IRS that this will be its final tax return.
Furthermore, the LLC must file a final return with the State Revenue Division in any jurisdiction where it has tax obligations.
To carry out the dissolution, you need to send a letter to the IRS that contains complete and accurate information about the Limited Liability Company, including the full legal name, employer identification number (EIN), LLC address, and an explanation for closing the LLC.
How to Dissolve a Single-Member LLC?
Closing an LLC can be a relatively straightforward process, especially if the LLC had a single member.
In the case of a single-member LLC that never elected to be taxed as an S-Corp or a corporation, there’s no need to notify the IRS that it will be the final tax return due to the way it’s taxed.
The business’s income and expenses are reported directly on the individual owner’s tax return. This means there’s no separate tax return for the LLC itself.
When a single-member LLC dissolves, the assets and liabilities of the business usually transfer to the individual owner.
From a tax perspective, there’s no separate entity that requires filing a final tax return because the taxes for the single-member LLC are tied to the owner’s individual tax return.
When Should You Dissolve an LLC?
- When the LLC ceases operations, it is crucial to dissolve your LLC; otherwise, you will remain responsible for paying the company’s taxes and internal debts.
- If members wish to change the legal structure of the company (for example, converting it into a C-corporation), dissolving the LLC may be part of the process.
Need Help Dissolving Your LLC in the United States?
Rex Legal is here to provide guidance and assist you in the process of dissolving your LLC. If you want us to support you in this process, feel free to contact us.