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Articles of Dissolution: How to Close a Company

Articles of Dissolution

Deciding to discontinue your business for any reason is a hard decision to make. But while you’re at it, simply declaring that you’re no longer conducting business isn’t enough. A board with big visible letters of ‘CLOSED’ right outside your company doesn’t help either. Irrespective of the size or structure of your LLC or corporation, you need to dissolve your company, legally, before you can disassociate yourself from the business.

The most crucial part of formally closing your company is to file articles of dissolution with your state. This is an intimation for the state to remove your name or the name of your organization from their records. Without such a notice, the state may still find you liable to pay fees or even fines.

Let’s look more into what are articles of dissolution, why they’re important and what happens if you don’t file these documents.

What are Articles of Dissolution and Why Should I File Them?

An article of dissolution is the official declaration that you’re ceasing all business activities under your current company’s name. The article intimates the state, the public and your creditors that your business no longer exists.

Usually, at the initiation of a new business, you are required to submit articles (documents) that prove the commencement of your enterprise. It’s crucial to remember that different types of business structures demand different articles of commencement. In case of an LLC (limited liability company), you’re required to submit an article of organization while a corporation requires an article of incorporation.

Just like you cannot establish your business as an independent entity without these articles, you cannot cease its existence without one. Therefore, if you wish to close a company, you must file an article of dissolution.

Before you take off with your business dissolution process, you must give a prior notice to your creditors. The notice allows them enough time to make claims and states that once the business is dissolved, you’re no longer liable to any new claims. However, if you end up dissolving your business while in debt to another party, you’ll still be liable to pay off those debts.

Sole Proprietorships and Partnerships

You do not require an article of dissolution when ending a sole proprietorship. You do, however, need to settle all your claims and liabilities before dissolving this type of organization.

In case of a general partnership, you are not required to file for articles of dissolution but if you’ve filed your partnership documents with your state, you must provide them with a formal notice to dissolve the business.

LLC and Corporations

In the case of a limited liability company and a corporation, you are required to file an article of dissolution before the company ceases to exist. However, just filing the document isn’t the beginning or the end of the process. A lot more goes into the process of dissolving a company.

Following are the steps to formally dissolve an LLC or corporation.

1. Vote to Dissolve

When other people are involved in your business, they have the right to decide what happens to the business in the future. Therefore, the dissolution of a company is no single person’s will but a collective decision of the majority.

At the time of dissolution, a meeting with the partners or the board is the starting point of the decision making process. As voting ensues, the decision of the majority is taken in account and the complete ordeal must be officially recorded.

2. Notify Your Creditors

Once the majority decides that dissolution is the way to go, the next step is to notify your creditors about the dissolution. The notice you provide to your creditors gives them time to make their claims and also states that post the dissolution of your company, no new claims will be accepted. A notice of this sort usually lasts for 90 to 180 days, depending on the state laws.

In most cases, sending this notice before filing the articles of dissolution is a better option, as it allows creditors enough time to make timely claims.

3. Take Care of Taxes and Licenses

Once the majority decides that dissolution is the way to go, the next step is to pay any pending fees or taxes (income or sales) and file your last tax returns.

You can contact the state as well as local authorities to find out whether you owe any taxes. In some states, you’re required to provide proof that all your taxes have been paid before you can apply for the dissolution or your company.

4. Prepare and File Articles of Dissolution

To finally close an LLC or corporation, you can find online forms on the website of the secretary of state. Since different states may have different requirements during the dissolution of a business, you might have to go through the state’s website and read through all the regulations to avoid any discrepancies.

Depending on the fee and procedure stated by your particular state, you can finally file your documents or have a professional service provider do it for you.

5. Other Steps in Closing a Business

You might be required to cancel multiple permits and licenses pertaining to different cities, counties or states that you have established your business in. The IRS requires you to close your IRS business account and cancel your EIN. Missing out on any of these permits can lead to additional fees or fines from the state or local authorities.

If you’re registered in other states for the same business you’re currently dissolving, you must contact the state authorities and cancel your licenses and permits.

Once you’ve paid off any pending debts or taxes, canceled all permits and licenses and formally dissolved your business, you can focus entirely on your new business, a new adventure or look forward to your retirement plans.


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