How Much to Dissolve LLC or Corporation: Costs & Process

Key Takeaways

• The cost to dissolve an LLC or corporation varies by state, but typical filing fees range from $25 to $200.
• Business owners may also face additional expenses such as legal or accounting fees, publication requirements, and back taxes.
• The process often includes voting to dissolve, filing articles of dissolution, settling debts, canceling licenses, and filing final tax returns.
• Some states require a tax clearance before you can formally dissolve.
• It's important to follow all legal steps to avoid future liabilities or penalties.
• You can find a qualified attorney on UpCounsel to guide you through the dissolution process.

How much does it cost to dissolve a corporation will depend on several factors including the time it takes to manage outstanding debts and obligations, the cost of legal fees, and other factors that are listed within the articles of incorporation.

When closing an S corporation, the articles act as a guideline. This can include holding a board meeting to present the dissolution plan, voting on the plan, and recording the meeting minutes. In comparison, a sole proprietorship or small LLC would only need to notify the secretary of state. This, however, is just the beginning. The process of dissolution has many steps that must be complied with to avoid any liability for taxes and other obligations.

Steps to Dissolve

There are several steps to dissolve a corporation. The first is related to tax considerations, which includes providing the Internal Revenue Service (IRS) with the following:

• A final tax return.
• A final employment tax return.
• A final federal tax deposit.

When the tax return is filed, you can mark a box on the first page to indicate this is the last and final tax return. In some situations, you will also need to file taxes at the state level. For employees, a final paycheck must be given, and all payroll taxes should be paid. If the corporation has more than 100 employees, the employees must receive written notice of the business closing sixty days prior.

Next, make attempts to pay any outstanding debts and obligations. Notification should be sent to all creditors notifying them of the plan to close the business with an address and deadline for any claims they want to submit. If the debts cannot be paid, bankruptcy may be a consideration. A legal and tax professional will be able to advise if this option is recommended. If all debts are paid, any remaining assets will be distributed to the shareholders.

Then, all business licenses and registrations must be canceled with the local or state government. Any business bank accounts and business credit cards must be closed as well. Failure to close the bank accounts leaves you vulnerable to future debts and obligations associated with business bank accounts.

Lastly, the Employee Identification Number (EIN), must be reported to the IRS with the appropriate form to indicate the business is closing.

Costs Involved in Dissolving an LLC or Corporation

The total cost to dissolve an LLC or corporation depends on various factors including your business structure, the state of incorporation, and whether you hire professional help.

1. State Filing Fees:Each state charges a fee to file the Articles of Dissolution. These fees can range from $25 to $200 depending on the state. For example:

• California: $0 for LLCs, but $20 for corporations
• New York: $60 for corporations; $0 to $60 for LLCs (based on publication requirements)
• Texas: $40 for both LLCs and corporations

2. Professional Services:Hiring a lawyer, accountant, or a dissolution service can cost anywhere from $100 to $1,000 or more, depending on the complexity of your business and location.

3. Taxes and Penalties:You may incur costs to pay off outstanding federal, state, and local taxes. Late fees and penalties can also apply if filings or payments are past due.

4. Publication Costs (if applicable):Some states, like New York and Arizona, require you to publish a notice of dissolution in local newspapers, which can cost between $200 and $1,500.

5. Business License & Permit Cancellations:While many states don’t charge a fee for canceling business licenses, some local jurisdictions may impose administrative costs.

6. Franchise Taxes or Final Annual Reports:States like California and Delaware may require a final franchise tax payment or annual report before dissolution is processed.

When considering how much to dissolve LLC or corporation entities, remember to factor in these associated costs to avoid surprises during the process.

Tax Clearance and Legal Obligations

Before filing dissolution paperwork, some states require businesses to obtain tax clearance or a certificate of good standing from the state tax authority. This ensures that all taxes—sales, payroll, franchise, or income—are paid in full.

Key states that require tax clearance include:

• California
• Illinois
• New Jersey
• Texas
• Pennsylvania

Failing to obtain tax clearance before filing can result in delays or rejection of your dissolution documents.

Legal obligations also include:

• Notifying creditors and resolving outstanding debts
• Filing final employment and income tax returns
• Distributing remaining assets to members or shareholders

It’s strongly recommended to consult a legal or tax professional to ensure full compliance.

What Happens if You Don’t Properly Dissolve Your Business

Neglecting to formally dissolve an LLC or corporation can lead to a number of legal and financial consequences:

• Ongoing state fees: You may continue to incur annual franchise taxes or filing fees.
• Loss of limited liability protection: If creditors sue your business, members or shareholders may be held personally liable.
• Accumulated penalties and interest: Late filing fees, tax penalties, and interest can build up quickly.
• Difficulty forming new entities: Future business registrations in the same state may be blocked until the old entity is officially closed.

Dissolution is a critical legal step that protects you from these risks. If you’re unsure of how much to dissolve LLC or corporate entities and what’s required, a business attorney can help guide you.

State-by-State Dissolution Cost Overview

Here is a quick reference guide to some common state fees for dissolving an LLC or corporation:

Note: Some states charge more for expedited service or require additional steps, such as publication or tax clearance, which may increase the total cost.

LLC vs. Corporation Dissolution: Key Differences

While the dissolution process for both LLCs and corporations follows similar steps, a few distinctions are worth noting:

LLC:

• Usually simpler and less expensive to dissolve
• Typically governed by an Operating Agreement
• Members vote to dissolve and file Articles of Dissolution

Corporation:

• Must hold a board meeting and vote by shareholders
• Often requires more paperwork and formality
• May involve liquidating shares and detailed tax filings

Understanding the structure-specific steps can clarify how much to dissolve LLC or corporate entities and streamline your decision-making.

Frequently Asked Questions

1. How much does it cost to dissolve an LLC?
   The cost can range from $25 to $200 in filing fees, with potential additional costs for legal help, tax clearance, and publication.
2. What paperwork is required to dissolve an LLC or corporation?
   You’ll typically need to file Articles of Dissolution and a final tax return, and in some states, obtain tax clearance or publish a dissolution notice.
3. Can I dissolve my business if I owe taxes?
   Most states require you to settle all outstanding taxes before approving a dissolution. Some may even require proof in the form of a tax clearance certificate.
4. What happens if I don’t dissolve my LLC or corporation?
   You may continue to owe state fees, taxes, and risk legal exposure for unresolved liabilities or lawsuits.
5. Can I handle the dissolution myself or do I need a lawyer?
   It is possible to file on your own, but hiring a lawyer is advisable for complex cases or when legal clarity is needed. UpCounsel can connect you with experienced business attorneys for help.

If you're still wondering how much to dissolve llc, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.