Learning Center

04 JAN

I Need to Dissolve a Business What Do I Need to Know

The simple fact is that countless businesses are dissolved every day in the United States. But why? Actually, there are a number of common reasons. Dissolution may become necessary as a result of disagreements or disputes between business partners, poor management, issues with cash flow, or actual bankruptcy. As a business owner, there may also be new agreements or business structures you’re moving toward, and dissolving an old business may be part of that process.

Whatever the reasons for dissolving a business, it’s important to make sure it’s done right, and that all the particulars of your unique situation are properly taken into account.

What kind of business do you have?

If you’re shutting down a partnership or a corporation, you’ll need approval from partners and/or shareholders in order to proceed. In the case of a sole proprietorship or an LLC, you obviously won’t need this kind of clearance — but it’s recommended to err on the side of caution and extra documentation when dissolving an LLC.

Filing paperwork with the state

Not every state works the same way, but generally speaking, your first “official” step (after all the details have been thought through and arranged) will be to file a Certificate of Dissolution in whatever state the business was formed. There are other filing requirements that go along with this, and you may have to file them before or after you file a Certificate of Dissolution — again, this depends on the state.

Another important detail about filing the dissolution with your state involves taxes. Many state require your business to “prove” that any and all applicable taxes have been paid before the dissolution can be filed with state authorities. This brings us to our next important point:


Not realizing (or acknowledging) that taxes are due is one of the most common mistakes made during the dissolution process — and the consequences can be real. Assuming that your business has no tax liability because of the fact that it’s being dissolved is a major mistake. A good place to start is the IRS website, which has a checklist of tax-related questions and procedures you should be aware of ahead of dissolving your business.


Just as no business can really “exist” in isolation, very few businesses can be dissolved without notifying other parties — including creditors. Providing detailed information to your creditors is an important step, and make the difference between a smooth dissolution process and one that drags on for months or even years as creditors try to reclaim debt.

Distribution of assets

Finally, it’s going to be necessary to distribute any assets that your business does have. This is done after creditors are paid, and it’s necessary to report the details of the distribution to the IRS

Is it simple or complicated?

Actually going through the process of dissolution can be easier or more difficult depending on the details of the situation — but even the simplest cases can seem difficult without good professional help. If you’re able to find a tax specialist who also specializes in the dissolution of businesses, the entire process can a whole lot easier — and you can spend more time focusing on what comes next!