What Are Articles of Dissolution? A Complete Guide to Formally Closing Your LLC or Corporation

When a business is ready to close, filing Articles of Dissolution is the formal step that ends its legal existence with the state. Without this filing, the state considers your LLC or corporation active, and you remain responsible for annual reports, fees, and taxes.

Common reasons business owners file Articles of Dissolution include:

• The business has fulfilled its purpose
• Owners are retiring or moving on to other ventures
• The business is no longer profitable
• Partners or members have decided to go separate ways
• The business is being restructured under a new entity

Filing Articles of Dissolution ensures your business closes properly, your obligations to the state end, and your records reflect the current status of the entity.

Eco-fyle’s Dissolution Filing service prepares and submits your Articles of Dissolution to the appropriate state agency, ensuring accuracy and compliance with your state’s requirements.

What Are Articles of Dissolution?

Articles of Dissolution (also called a Certificate of Dissolution, Certificate of Termination, or Certificate of Cancellation depending on the state) are the formal documents filed with the Secretary of State or equivalent agency to end a business entity’s legal existence. For LLCs, this filing terminates the entity created by the Articles of Organization. For corporations, it terminates the entity created by the Articles of Incorporation.

Articles of Dissolution formally terminate the entity established by your original formation documents. Until this filing is accepted, the state considers your business active and expects ongoing compliance, including annual reports, franchise taxes, and other required filings.

It is important to note that dissolution applies to LLCs and corporations. Sole proprietorships and general partnerships that were not formed through a state filing do not need to file Articles of Dissolution. However, sole proprietors and partners should still close out any DBAs, licenses, permits, and tax accounts associated with the business.

When Should You File for Dissolution?

Dissolution should be filed when the business has permanently ceased operations and the owners have decided to formally close the entity. There is no requirement to dissolve a business by a certain date after it stops operating, but delaying the filing allows fees and compliance obligations to continue accumulating.

Many business owners choose to file before the end of the calendar year. Closing before year-end can help avoid annual reports, franchise taxes, and other compliance obligations that would apply in the new year.

Dissolution is also appropriate when a business has completed a specific project or purpose, when the owners can no longer agree on the direction of the company, or when the business is being replaced by a new entity with a different structure.

Before filing, the business should be in a position to settle its remaining affairs. This includes collecting outstanding receivables, paying debts, distributing remaining assets to owners, and completing final tax filings. The dissolution filing itself is one of the last steps in the process, not the first.

How to Dissolve an LLC or Corporation

The process for dissolving an LLC and a corporation follows the same general sequence. The primary difference is in how dissolution is authorized within the business.

1. Authorize the dissolution. LLCs require a vote by the members to approve the dissolution. Review the operating agreement for voting thresholds and notice requirements. Corporations require the Board of Directors to adopt a formal resolution, followed by a shareholder vote. Most states require approval from two-thirds of the voting shares, though this varies. In either case, the results of the vote must be recorded in meeting minutes.

2. Confirm the business is in good standing. Before a state will accept Articles of Dissolution, the entity must typically be current on all compliance obligations. This includes filing any outstanding annual reports and paying any fees or taxes owed to the state. If the business is not in good standing, it may need to be reinstated before dissolution can proceed.

3. Settle debts and notify creditors. Notify creditors, vendors, and other parties to whom the business owes money. Provide them with information about where and by when claims should be submitted. Collect any outstanding receivables owed to the business. Settle all debts before distributing remaining assets to owners.

4. File Articles of Dissolution. Complete and submit the dissolution form required by your state to the Secretary of State or equivalent agency. The form typically requires the entity’s legal name, the date of dissolution, and confirmation that the business has settled its affairs or made provisions for doing so.

5. File final tax returns. Submit final federal and state income tax returns. Check the box indicating that these are the final returns for the entity. If the business had employees, pay all final wages, issue W-2s, and file final payroll and unemployment tax forms. If the business paid any contractors $600 or more during the final year, file Form 1099-NEC for each contractor. For corporations, prepare and distribute Schedule K-1 forms to shareholders if applicable.

6. Close your IRS business account. Send a letter to the IRS requesting that your business account be closed. Include the entity’s legal name, EIN, business address, and the reason for closing the account. Include a copy of the EIN Assignment Notice if it is available. The IRS will not close the account until all required returns have been filed and all taxes owed have been paid.

7. Cancel licenses, permits, and registrations. Cancel all business licenses and permits issued by federal, state, county, and local agencies. Cancel any DBA registrations associated with the business. Close your state sales tax account if applicable.

8. Distribute remaining assets. After all debts, taxes, and obligations have been settled, distribute remaining cash and assets to owners. For LLCs, distributions are typically made in proportion to each member’s ownership interest as outlined in the operating agreement. For corporations, assets are allocated among shareholders based on their share of ownership.

9. File withdrawal in other states. If the business is foreign qualified in states other than the home state, file a Certificate of Withdrawal (or equivalent) in each of those states to end the entity’s registration there.

What to Do After Filing Articles of Dissolution

Once the state accepts your Articles of Dissolution, there are several follow-up steps to ensure the closure is complete.

Verify that the state has accepted your dissolution filing by checking the state’s online business records or contacting the filing office. Retain a copy of the filed dissolution for your records.

Keep copies of all dissolution-related documents, including final tax returns, meeting minutes documenting the vote to dissolve, and records of creditor notifications and debt settlements. It is recommended to retain these records for at least seven years in case of future inquiries.

After all outstanding transactions have cleared and remaining funds have been distributed, close the business bank accounts. Cancel any business insurance policies and notify providers that the business has been formally dissolved. If the business has a website, social media accounts, or other public listings, update or remove them as appropriate to reflect that the business is no longer operating.

When Reinstatement Is Required Before Dissolution

In most states, a business that is not in good standing cannot file for voluntary dissolution. The state requires the entity to resolve all outstanding compliance issues before it will accept Articles of Dissolution.

This typically means filing all past-due annual reports, paying outstanding franchise taxes and fees, and clearing any accumulated penalties. Some states have additional requirements. In states like New York and New Jersey, the business must obtain a Tax Clearance Certificate from the Department of Revenue before the Secretary of State will process the dissolution filing.

Why States Require Reinstatement

Dissolution is a formal legal exit from the state. To grant that exit, the state needs to confirm that all tax obligations have been met, all required filings are current, and the public record accurately reflects the entity’s history at the time of closure.

What Happens Without Reinstatement

If a business remains out of good standing long enough, the state will eventually administratively dissolve the entity. While this may appear to resolve the issue, administrative dissolution does not eliminate the entity’s outstanding obligations. Taxes, fees, and penalties remain owed, and owners or officers may face personal liability for certain amounts. In some states, administrative dissolution can also prevent owners from forming or registering new businesses until the outstanding balance is settled.

How to Reinstate and Dissolve

The process begins by contacting the Secretary of State to determine exactly what is outstanding, whether that is reports, fees, or taxes. From there, file all past-due annual reports and pay all outstanding taxes, fees, and penalties. Once everything is resolved, submit the reinstatement application. After the state confirms the entity is back in good standing, you can proceed with filing Articles of Dissolution.

It is worth noting that reinstatement costs can be significant depending on how long the entity has been out of compliance. Some states offer amnesty programs or simplified dissolution options for businesses that have not been active for several years. Contacting the Secretary of State’s office directly can help clarify what options are available.

Eco-fyle’s Reinstatement service can help bring your business back into good standing so you can proceed with dissolution.

Dissolving a Business with Debt

When a business has outstanding debts that it cannot fully pay, owners must understand how those obligations are resolved before proceeding with dissolution.

If the business has sufficient assets to cover its debts, those assets should be sold or liquidated to pay creditors before any remaining funds are distributed to owners. Partners, members, or directors must approve the liquidation plan and notify creditors of the process.

If the business cannot pay all of its debts, the remaining financial obligations become uncollectable for the creditors who are owed money. However, if business owners personally guaranteed any loans or business debts, they may be held personally responsible for repayment, even after the entity is dissolved. This is an important distinction, as dissolution of the entity does not automatically eliminate personal guarantees.

The guidance of an accountant and an attorney can help ensure debts are handled properly and that owners understand their personal exposure before completing the dissolution.

Dissolution vs. Administrative Dissolution

There are two types of dissolution, and the difference has significant implications for business owners.

	Voluntary Dissolution	Administrative Dissolution
Initiated by	Business owners	The state
Reason	Owners decide to close the entity	Business repeatedly fails to meet compliance obligations
Process	Owners vote, settle affairs, and file Articles of Dissolution	State dissolves the entity after multiple failed attempts to resolve deficiencies
Effect on debts	Owners settle obligations before closing	Debts, taxes, and liabilities remain
Resuming operations	Not applicable	Owners must file for reinstatement and resolve all outstanding issues

Voluntary dissolution is always the preferred path. It allows owners to close the business on their own terms, settle affairs in an orderly way, and maintain a clean record with the state.

State Filing Requirements and Fees

Dissolution requirements, forms, and fees vary by state. The table below summarizes the key variables to confirm before filing.

Requirement	Details
Filing location	Secretary of State in most states. Some states use different agencies.
Filing fees	Typically range from $20 to $200 depending on the state.
Filing methods	Online, by mail, or in person depending on state. Many states offer multiple options.
Tax clearance	Some states require tax clearance from the state tax agency before accepting Articles of Dissolution.
Publication	Some states require publishing a notice of dissolution in a local newspaper.
Processing times	A few business days to several weeks depending on state and filing method. Expedited options may be available.

Key Takeaways

1. Articles of Dissolution formally end your LLC or corporation with the state. Without this filing, the state considers your business active and you remain responsible for ongoing compliance obligations.

2. Dissolution involves more than just filing paperwork. Before filing, the business must settle debts, notify creditors, file final tax returns, and distribute remaining assets to owners.

3. The approval process differs for LLCs and corporations. LLCs require a member vote. Corporations require a board resolution and, in most cases, a shareholder vote.

4. A business that is not in good standing must be reinstated before dissolving. If your LLC or corporation is not in good standing due to unfiled reports or unpaid taxes, the state requires reinstatement before it will accept Articles of Dissolution.

5. File withdrawal in every state where the business is registered. If your business is foreign qualified in additional states, file a Certificate of Withdrawal in each of those states.

6. Retain dissolution records for at least seven years. Keep copies of all filed documents, final tax returns, meeting minutes, and creditor correspondence for future reference.

Ready to Close Your Business? Eco-fyle Is Here to Help

When you are ready to formally close your LLC or corporation, filing Articles of Dissolution ensures your entity’s record with the state is properly resolved. The process involves multiple steps, but proper preparation ensures each one is handled correctly and efficiently.

Eco-fyle’s Dissolution Filing service handles the preparation and submission of your Articles of Dissolution. Backed by over 20 years of business compliance experience through Eco-Tax, we ensure your filing is accurate and complete. We handle the details so you can close this chapter with confidence.

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