How to Stop My LLC

By Tom Speranza, J.D.

How to Stop My LLC

By Tom Speranza, J.D.

A limited liability company (LLC) is a business entity that forms by filing articles of organization or, in some states, a certificate of formation. To stop an LLC, or end its legal existence, the owners, called members, must take specific steps to dissolve the company, pay any taxes it owes, and wind up its business operations.


Although each state has slightly different requirements, the steps involved from state-to-state are mostly similar.

1. Review the operating agreement.

Most LLC governing documents, called operating agreements, require certain votes to begin the dissolution process. Typically the members who collectively own more than 50 percent of the membership interests—a majority of the equity—must approve the decision to dissolve, but sometimes operating agreements mandate a supermajority vote.

If your business doesn't have an operating agreement or include a dissolution procedure in its articles of organization, the standard rules in your state's LLC law apply. For example, Delaware law requires a vote for dissolution by members owning at least two-thirds of the membership interests.

2. File the certificate of dissolution or cancellation.

After the members vote, the LLC files a certificate of dissolution, sometimes called a certificate of cancellation, with the Secretary of State or equivalent office in the LLC's formation state.

3. Terminate the LLC's existence in other states.

If your LLC qualified to do business or is registered in other states, it must also terminate its legal existence in those states. After filing the certificate of dissolution in the business's formation state, you file a certificate of withdrawal, sometimes called a certificate of termination, in each other state where it was qualified to do business as a so-called foreign LLC.

4. Pay final tax obligations.

Your LLC's formation state, the other states where it registered, and the Internal Revenue Service will not consider the company completely dissolved or withdrawn until it settles all outstanding tax obligations. You must contact the revenue department of each state to:

  • Notify it of your LLC's dissolution or withdrawal
  • Calculate and pay the final amounts owed for sales tax, franchise tax, income tax, and any state-required employee payroll deductions

State revenue departments often take months to review final returns, and the issuance of a final tax clearance certificate sometimes doesn't happen until more than a year after the dissolution. You also need to pay all federal tax obligations, file any remaining federal tax returns, and cancel your LLC's employer identification number if it had one.

5. Appoint a manager or trustee.

After a certificate of dissolution has been filed, it must wind up and liquidate its business operations. The operating agreement may designate someone to manage the liquidation process, but if it doesn't, the law of the LLC's formation state determines who runs the liquidation.

6. Wind up and liquidate the business.

The person liquidating the business must complete the following steps:

Determine the value of your assets. Calculate the worth of all the buisness's assets (land, buildings, equipment, inventory, supplies, software, customer contracts, cash-on-hand, accounts receivable, etc.).

Total the liabilities. Add up the LLC's liabilities and other payment obligations (real estate leases, vendor contracts, bank and credit card debt, payroll, employee benefits, taxes, etc.). If the amount of a future liability is uncertain, such as the cost of pending litigation, the liquidator makes a good faith estimate of the payment obligation.

Convert assets to cash. Convert the LLC's assets to cash so that creditors can be paid. The liquidator collects accounts receivable and sells any remaining inventory, supplies, and valuable hard assets—such as furniture, fixtures, and equipment. If there are transferable intellectual property or real estate leases, the liquidator licenses, subleases, or sells them.

Pay creditors. With the cash generated from liquidating the assets, pay off any bank debt, credit cards, landlords, contractors, lawyers, accountants, consultants, vendors, employees, tax authorities, and anyone else to which the LLC owes money.

If there's not enough money to pay all liabilities in full, the liquidator pays them in order of priority—earlier obligations get paid before later obligations. If liabilities of equal priority cannot be paid in full, they are paid in the same percentage—for example, at 10 cents on the dollar.

Establish reserves. If there's money left over after paying current debts, the liquidator sets aside funds to pay any known future liabilities—such as a pending lawsuit or a required contribution to an employee benefit plan. Any reserve is based on a good faith estimate of future liability.

Distribute remaining assets. If there's money or assets left after paying creditors and establishing reserves, the liquidator distributes them to the LLC's members in accordance with the operating agreement.

Following all these steps to dissolve your business is crucial, otherwise it won't technically be stopped. Make sure all the required certificates of dissolution and withdrawal are prepared correctly and filed in the proper state offices with the applicable filing fees so your LLC will be legally ended.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.