Most guides tell you how to open a US company. Almost none tell you how to close one — which is why so many non-residents simply stop paying and walk away, then discover years later that the company never actually went away and the IRS penalties never stopped.
If you need to dissolve a US LLC, this guide covers the correct order, what abandoning it really costs, and the one filing that catches people out long after they thought they were finished.
Table of contents
Why you cannot just walk away
This is the single most expensive misunderstanding in this article, so let us be direct about it.
If you stop paying and ignore the company, it does not disappear. What actually happens:
- The LLC stays legally in existence until it is formally dissolved with the state.
- Your federal filing obligation continues. Form 5472 with a pro forma 1120 is due every year the entity exists — and the penalty is $25,000 per year, with no small-business exception and no exemption for zero income.
- In states with annual reports (Wyoming, for instance) fees and penalties accrue until the state eventually dissolves the company administratively — which is not the same as a clean closure.
- Your registered agent may resign for non-payment, which can put the company out of good standing faster.
Closing properly usually costs less than one year of the penalty you are risking by not closing.
The correct order
Sequence matters here. Do these out of order and you will find yourself unable to pay a final bill because you already closed the account.
1. Stop taking new revenue and settle the business
Finish or cancel client work, collect what you are owed, and pay what you owe. Cancel subscriptions billed to the company.
2. Cancel payment processing
Close Stripe and PayPal — but only after any pending payouts and possible chargeback windows have passed. Closing while a dispute is open can leave money stranded.
3. Settle debts and distribute what is left
Creditors before owners. Once liabilities are cleared, remaining funds are distributed to you as the member. Keep a record of this; it goes on your final filing.
4. File the dissolution with the state
Usually called Articles of Dissolution or a Certificate of Cancellation. Each state has its own form and fee. This is the step that legally ends the company.
5. File the final federal return
Form 5472 and the pro forma 1120 one last time, covering the final year, marked as a final return. This is the step people miss — the state dissolution does not tell the IRS anything.
6. Close the bank account
Only after everything above has cleared. Keep statements.
7. Cancel the registered agent
Last, not first — you need them until the dissolution is filed and accepted.
8. Keep your records
Formation documents, EIN letter, filings and final statements. Several years, not several weeks.
What happens to your EIN?
An EIN is never reused or reassigned, and it cannot really be “cancelled”. What you can do is ask the IRS to close the business account associated with it, in writing, quoting the legal name, EIN and the reason for closure.
This does not delete the number — it simply marks the account closed. And it does not replace your final return; you still file that.
What it costs
| Item | Typical cost |
|---|---|
| State dissolution fee | Small — usually tens of dollars, varies by state |
| Outstanding annual reports / penalties | Whatever has accrued, must be cleared first |
| Final Form 5472 + 1120 preparation | Similar to a normal year’s filing |
| Registered agent | Runs until dissolution is accepted |
Compare that with $25,000 per year for an unfiled Form 5472 on a company you thought you had abandoned, and the arithmetic makes itself.
Consider not closing at all
Worth saying, because closing is not always the right move.
If your company is in New Mexico, the state charges nothing to keep it alive — no annual report, no franchise tax. Keeping a dormant New Mexico LLC costs you the registered agent and the annual federal filing, and nothing else.
So if there is any realistic chance you will restart within a year or two, parking the company is often cheaper and far less hassle than dissolving it and forming a new one later — you would lose the EIN, the banking history and the formation date. Just do not confuse “parked” with “ignored”: the Form 5472 obligation continues either way.
Mistakes that cost real money
- Closing the bank account first. Then you cannot pay the dissolution fee or any final bill from the company.
- Skipping the final federal return. The most expensive omission on this list.
- Closing Stripe with pending payouts. Funds can be very hard to retrieve afterwards.
- Cancelling the registered agent early. Your dissolution paperwork may have nowhere to be delivered.
- Assuming administrative dissolution is the same as closing. It is a penalty, not a clean exit, and it leaves loose ends.
- Distributing money before paying creditors. Can make you personally exposed.
Frequently asked questions
Can I just stop paying and let the LLC lapse?
You can, but it is a bad idea. The federal Form 5472 obligation continues while the entity exists, at $25,000 a year, and administrative dissolution leaves a messy record rather than a clean closure.
How long does dissolution take?
The state filing is normally processed within days to a few weeks. The full wind-down — payouts cleared, final return filed — realistically takes a couple of months.
Do I need to file a final tax return even with no income?
Yes. The same rule applies as every other year: the filing obligation is not about income.
Can I reopen the same LLC later?
Once formally dissolved, generally no — you would form a new company with a new EIN. Which is exactly why parking a New Mexico LLC is often better than closing it.
What if I have unpaid state fees?
They normally need clearing before the state will accept your dissolution.
Does dissolving cancel my EIN?
No. EINs are permanent. You can ask the IRS to close the business account tied to it, but the number is never reissued or erased.
Not sure whether to close or park it?
If your company is in New Mexico and you might come back to it, parking is usually cheaper. If you are certain you are finished, closing it properly protects you from penalties that outlast the business.
We handle the annual Form 5472 and 1120 filing, including final returns, and can advise on which route fits your situation.
Message us on WhatsApp with your state and situation and we will tell you honestly which option costs you less.