Key Takeaways

  • Closing a business in Illinois involves final tax filings, dissolving with the Secretary of State, and canceling registrations.
  • Business type (LLC, corporation, sole proprietorship) affects the process and required documents.
  • Illinois requires notification to both the Department of Revenue and the Secretary of State.
  • Final tax obligations must be resolved, including sales, withholding, and income taxes.
  • Specific forms and fees vary depending on business entity type.

When closing a business in Illinois, business owners or members must follow numerous important steps. Otherwise, unexpected consequences may result in the wake of the company's dissolution.

  1. File final tax returns and terminate your EIN.
  2. File the required dissolution documents.
  3. Settle any remaining tax liabilities and other debts.
  4. Sell any remaining inventory, property, and other assets.
  5. Cancel any remaining insurance policies, licenses, or permits.

Notify the Illinois Department of Revenue

When closing a business in Illinois, it's essential to inform the Illinois Department of Revenue (IDOR) to avoid ongoing tax liabilities. You should:

  • File your final Illinois income, sales, and withholding tax returns.
  • Pay any outstanding tax liabilities.
  • Close all tax accounts, such as your Illinois Business Tax (IBT) number.

You can do this online by logging into MyTax Illinois and updating your account status, or by submitting the “Request to Cancel Business Tax Registration” form (REG-16). This process ensures that your tax responsibilities are terminated and no future filings are required. You can also call IDOR at 217-785-3707 for assistance.

General Steps for Closing a Business

The proper steps for closing a business vary based on the type of business. However, there are some universal steps and principles that must be followed in order to close the business properly, protect the business owner or owners against future liabilities, and to make certain that all obligations are correctly met so that issues do not continue to follow you after the business closes its doors.

The following steps are crucial when closing a business. If followed correctly, the process will go smoothly. However, if steps are skipped or overlooked, significant consequences may result.

  1. File the final tax return for your business. When a business closes, the owner must still file a tax return from the final year the entity remained in business, regardless of how much time passed during that period. For instance, if a company closed on Jan. 5, they would file a tax return for that year the following year, even though it was only open for five calendar days during that final year.
  2. File a final tax return for employment taxes. In addition to your income and business taxes, be sure to file your employment tax return as well. You must likewise be sure to pay your federal employment tax deposits.
  3. Be sure to note on all tax returns that this is the final tax return. Most returns have an available checkbox where you may indicate this. You should also then contact the IRS to notify them of your need to terminate your employer ID number (EIN).
  4. Process all required dissolution documents. If you fail to dissolve the operation of your business, it will continue to accrue taxes and fees since it will still be operational as far as any government entities know. This is particularly important to legally separate ownership issues when partners or multiple owners are involved. This step will help stave off confusion about liability and business ownership in the future.
  5. Confirm your final tax liabilities. This step will ensure that you don't leave an unpaid balance which may come back to haunt you in the future.
  6. Sell whatever remaining stock, inventory, and property you have. These funds can help offset other final expenses.
  7. Cancel any remaining insurance policies, licenses, or permits. These may be local (city, town, or county), state, or federal. Contact the issuing entity to cancel these and save yourself from future charges. Be sure to proactively cancel any business liability insurance and workman's compensation insurance, as well as notify the health care insurance provider for your employee health plan. Do likewise for any other employee benefit providers.

Closing a business is a difficult experience. It usually means the business operator is closing down due to taking a loss. Going through the steps of closing a business may be painful while in the midst of such difficult circumstances. However, by maintaining the discipline to follow these steps and properly close down a business, you will avoid unnecessary bills, unexpected liabilities, and future difficulties. Following the closure of a business, the last thing you want is for the closure to resurface over and over for years to come.

Cancel Business Registrations and Accounts

Apart from terminating your federal EIN, you must also:

  • Cancel your Illinois Business Tax (IBT) registration.
  • Notify the Illinois Department of Employment Security (IDES) if you had employees.
  • Cancel any local business licenses, permits, or zoning registrations at the city or county level.

Failing to cancel these can result in continued reporting obligations and unexpected fees. Always request written confirmation of the cancellation for your records.

Information Specific to Illinois

While most of the steps to closing a business are universal, there are some unique and specific items for each state. Illinois is no exception. The Illinois Business Portal features a list forms and notices required to correctly cease operations for your business. Article of Dissolution Forms may be obtained from the Illinois Secretary of State's Office. Be sure to include a $5 check, payable to the Illinois Secretary of State, and mail the completed form and payment to Secretary of State Department of Business Services, Springfield, IL, 62756.

In Illinois, you must file your final income tax return by March 15 of the year following your final year in business. The Illinois Department of Revenue can help you discuss your business's tax liabilities and may be reached at (217)785-3707 or at any office location. The DOR will also help you determine if you need to file any additional forms based on your specific business.

Additional Steps for Out-of-State (Foreign) Businesses

If your business was formed outside Illinois but registered to operate within the state, you’ll need to formally withdraw your business. This involves:

  • Filing an Application for Withdrawal with the Secretary of State.
  • Ensuring all final Illinois tax liabilities are paid.
  • Providing a certificate of good standing from your home state (in some cases).

This step formally ends your obligation to comply with Illinois regulations and tax filings as a foreign entity.

Filing Articles of Dissolution for Corporations and LLCs

For LLCs and corporations registered in Illinois, you must file appropriate dissolution paperwork with the Illinois Secretary of State. The correct form depends on your entity type:

  • Domestic LLCs must file Form LLC-35.15 (Articles of Dissolution).
  • Foreign LLCs must file Form LLC-45.20 (Application for Withdrawal).
  • Corporations must file Form BCA-12.20 (Articles of Dissolution) if voluntary.

These forms can be downloaded from the Illinois Secretary of State’s website. Most forms must be mailed with a $5 filing fee to:

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Secretary of State  Department of Business Services  501 S. Second St., Rm. 351  Springfield, IL 62756  

Processing can take 7–10 business days. Expedited service may be available for an additional fee.

Frequently Asked Questions

  1. What forms are needed to dissolve an LLC in Illinois?
    You must file Form LLC-35.15 (Articles of Dissolution) for domestic LLCs or Form LLC-45.20 for foreign LLCs with the Secretary of State.
  2. How do I cancel my Illinois Business Tax number?
    You can cancel your IBT number online through MyTax Illinois or by submitting Form REG-16 to the Illinois Department of Revenue.
  3. When are final tax returns due for a closed business in Illinois?
    Final income tax returns are typically due by March 15 of the year following the business’s last year of operation.
  4. Do I need to notify local governments when closing my business?
    Yes, you should cancel any local licenses, permits, or zoning registrations with the relevant municipal or county offices.
  5. What happens if I don’t formally dissolve my Illinois business?
    The business may continue to incur state fees, taxes, and penalties. Owners could also remain liable for compliance obligations and debts.

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