Winding down a business involves more than simply walking away from it. You'll need to officially dissolve your LLC to be off the books and in good standing with the state.
Why? Well, think of it this way: You had to act to officially form your LLC with the state (these are your articles of organization). Likewise, you have to act to officially dissolve it (your articles of dissolution).
If you don't take this step and simply "walk away" from your LLC, you'll risk penalties, fees, and a bad standing with the state. These risks are mainly due to things like state-required annual reports being due each year. If your business hasn't dissolved, these will still be due, and the state will penalize you for ignoring them.
How to dissolve your LLC
For most LLCs, there are two main requirements for dissolving:
Filing the articles of dissolution with your state
Canceling your employer identification number (EIN) with the IRS (click here to learn how)
There are sometimes small fees for filing articles of dissolution. Fees vary state-to-state, but the overall process is typically straightforward. Quick searches online will easily turn up resources or how-to articles from your state. As an example, here are the resources from the Texas Secretary of State or the Florida Department of State.
Canceling your EIN involves sending a letter to the IRS. More info on this can be found here.
If you were the sole member of your LLC and it wasn't generating revenue or never quite got up-and-running, that's pretty much it! After you take these steps, look for a confirmation from the IRS that your EIN has been canceled. After that, check for a confirmation from the state that your articles of dissolution are filed. Your state also has a database you can check to see the official status of your business and confirm the dissolution.
However, if your LLC is more established, there are other steps you may need to consider to officially wind down and dissolve. For instance:
Did your LLC form with more than one official member? You may have to vote on the dissolution. You may also need to change your filing process, and/or take actions outlined in the operating agreement that you set up when you formed. Search for more information on dissolving an LLC with multiple members in your state for more information.
Do you have any other activities to tie up before you dissolve your business? Maybe you bought a store or other property, had to obtain certain permits, or created debt in your LLC's name? Likewise, did you owe business taxes this year, or employed other people? You will need to close these accounts and get these affairs in order as part of the dissolution process. Again, search for the requirements in your state for more information on how to do these, or consult with an advisor.
Do I have other options?
If you want to put off the process of dissolving your business or think you may resume business someday, here are some options:
Continue filing your annual report. Again, annual reports are required each year by the state, and you may face penalties for not filing one. If you're unsure about the future of your LLC, you could simply continue filing annual reports to stay compliant with the state year after year.
Dissolve, but file a name reservation. If you feel like you might come back to your business idea and LLC name in the future, you could dissolve now and file a name reservation later. You will need to file name reservations with the state. Search your state's resources for more information — for instance, here is an article from the Texas Secretary of State.
Disclaimer: The information in this article is meant to be generally informative and helpful in guiding you toward answers to frequently asked questions. It shouldn't be considered official legal or financial advice. We strongly recommend you confirm your options with the resources linked to above, information offered by your state, or other professional advisors.