To close a business in the US, record the owners' decision in writing, notify and pay employees and creditors, sell or distribute the assets, file final federal and state tax returns, file dissolution or cancellation papers with every state where the company is registered, cancel licenses and permits, and keep the records the law requires. An LLC or corporation that stops trading without dissolving keeps its state tax and filing duties, so walking away does not end the costs. Two deadlines catch owners out: a corporation must file IRS Form 966 within 30 days of adopting a resolution to dissolve, and an employer with 100 or more full-time employees generally owes 60 days' notice under the WARN Act before a closing that affects 50 or more workers at one site. Before cancelling company systems, check how long records must be kept and whether operational records such as tickets, work orders, chat archives and code can be licensed.
- An LLC or corporation keeps owing state taxes and fees until it is formally dissolved; abandoning it does not end them.
- Pay final wages and withheld payroll taxes first: unpaid trust fund taxes can become a personal debt.
- Export and list your records before cancelling systems. Some must be kept for years, and some may be worth licensing.
Closing a business checklist
Most US closures follow the same steps, whatever the business type. The order varies by state, and several steps run in parallel. The IRS and the SBA publish the federal outlines; the sections below add the state, employee and records detail.
| Step | What to do | Rule or deadline to know |
|---|---|---|
| 1. Decide and document | Owners or the board vote to close; record the decision in writing | A corporation files IRS Form 966 within 30 days of the resolution |
| 2. Tell employees | Give notice, pay final wages, wind up benefit plans | Federal WARN Act: 60 days' notice for covered closings |
| 3. Notify creditors | Send written notice of the closing and a deadline for claims | Washington: a deadline of at least 120 days |
| 4. Collect and sell | Collect receivables, sell assets, end leases and contracts | Report sales of business property on Form 4797 |
| 5. Pay debts | Pay creditors in the order the law sets, withheld payroll taxes first | Unpaid withheld taxes can become a personal penalty |
| 6. File final tax returns | Federal and state income, payroll and sales tax returns marked final | Final Form 941 or 944 for the quarter final wages are paid |
| 7. Dissolve with the state | File articles of dissolution or a certificate of cancellation in every state where you are registered | Several states require taxes to be paid first |
| 8. Cancel registrations | Licenses, permits, sales tax accounts, trade names | Cancel everything you no longer need |
| 9. Close the EIN account | Write to the IRS | Only after all returns are filed and taxes paid |
| 10. Keep records | Store tax, payroll and employee records and name who holds them | Employment tax records: at least 4 years |
| 11. Check the records' value | Before deleting systems, see whether operational records can be licensed | Retention rules come first |
Source: IRS: Closing a business
Step 1: Decide to close and record the vote
Sole proprietors can decide on their own. Any partnership needs the co-owners to agree, and the SBA advises following your articles of organization and recording the decision in a written agreement.
In a corporation the board adopts a resolution to dissolve and the shareholders vote on it. Under Delaware law, for example, dissolution needs the votes of a majority of the outstanding stock entitled to vote.
The date of that resolution starts a federal clock. A corporation must file Form 966 within 30 days after it adopts a resolution or plan to dissolve, with a certified copy of the resolution attached, and file again within 30 days of any amendment.
- The closing date and the last day of operations.
- Who may sign state filings and tax returns, sell assets and deal with creditors.
- Who keeps the records after closing, and where.
- What happens if the company cannot pay its debts in full: an orderly wind-down, an assignment for the benefit of creditors or bankruptcy.
Source: SBA: Close or sell your business
Step 2: File articles of dissolution with the state
An LLC or corporation exists until the state records its end. Failing to dissolve with any state where you are registered exposes you to continued taxes and filing requirements, the SBA warns. The paperwork has different names. In California, for example, domestic corporations dissolve, corporations from other states surrender, and LLCs and partnerships cancel (FTB Publication 1038).
Requirements differ by state. Four examples:
| State | What it requires | Source |
|---|---|---|
| California | Pay all tax balances, file the final tax return marked final, stop doing business, then file the dissolution, surrender or cancellation forms with the Secretary of State within 12 months of that return. LLCs owe the $800 annual tax each year, even when not doing business, until they cancel. | FTB Publication 1038; FTB |
| Delaware | A majority of the outstanding voting stock approves dissolution. All franchise taxes must be paid first, and a corporation ending its existence must file an annual report and pay all tax due. LLCs pay a $400 annual tax due by June 1. | Delaware Code; Division of Corporations |
| New Jersey | Dissolution takes effect when the state receives the articles of dissolution, all fees and a tax clearance notice. Until then a corporation owes at least the $500 minimum tax each year. | NJ Division of Taxation |
| Washington | A dissolved corporation may carry on only the business of winding up: collecting assets, paying liabilities in the order the law sets, then distributing what is left to shareholders. | RCW 23B.14.050 |
Source: California Franchise Tax Board: Publication 1038, dissolve, surrender or cancel a business entity
I want to close my business and walk away: can I?
It depends on the structure. A sole proprietorship is not a separate entity, so there is no state entity to dissolve, but the owner can be held personally liable for the business's debts (SBA). The owner still files a final Schedule C, pays any employees and cancels licenses (IRS; SBA).
An LLC or corporation cannot simply be abandoned. It keeps existing, and so do its obligations:
- State taxes keep running. California LLCs owe the $800 annual tax even when not doing business, until the LLC is cancelled (FTB). A New Jersey corporation owes at least the $500 minimum tax every year until it legally dissolves, plus penalties for late filing (NJ Division of Taxation). Delaware LLCs owe $400 a year, with a $200 penalty and 1.5% interest a month if it is paid late (Delaware).
- Unpaid payroll taxes become personal. The IRS can assess the Trust Fund Recovery Penalty against anyone responsible for paying withheld taxes who wilfully fails to, and can then take collection action against their personal assets (IRS).
- Paying owners before taxes creates liability. In New Jersey, an officer or director who distributes assets to shareholders in a dissolution before paying franchise taxes is personally liable for them (NJ Division of Taxation).
- Personal guarantees survive. A guarantee you signed for a lease or loan is a separate contract and is not discharged by dissolving the LLC or corporation (Alper Law).
- Claims stay open longer. Washington lets a dissolved corporation bar known claims that creditors do not submit by a notice deadline, but only if it sends that notice (RCW 23B.14.060). In Delaware a dissolved corporation continues for 3 years for lawsuits by or against it (Delaware Code).
Source: SBA: Close or sell your business
If the company cannot pay its debts
The closest lawful version of walking away is an assignment for the benefit of creditors (ABC). The company transfers all its assets to an assignee who sells them and pays creditors, and once the ABC starts the board has no further role (Mayer Brown). An ABC does not discharge debts that are not repaid in full (Fairfield and Woods), and personal guarantees still bind. Chapter 7 bankruptcy is the court-run alternative; a corporation gets no discharge there either (U.S. Courts).
See selling company data in an ABC for how the two routes compare and what happens to company records in each.
Source: Mayer Brown: ABC, assignments for the benefit of creditors (Feb 2023)
Employees: final pay, WARN notices and benefit plans
Federal law does not require an immediate final paycheck, but some states do (U.S. Department of Labor). California requires a discharged employee to be paid all wages, including accrued vacation, immediately at termination (California Labor Commissioner). Check your state's rule before you set the last day.
Larger closures need advance notice. The federal WARN Act requires written notice at least 60 calendar days before a covered plant closing or mass layoff. It applies to employers with 100 or more full-time employees, and a plant closing is one that affects at least 50 employees at a single site (DOL employer's guide). The guide lists three exceptions: a faltering company seeking capital, unforeseeable business circumstances and natural disasters. Some states go further:
- Final payroll filings: file the final Form 941 or 944 for the quarter in which you pay final wages, check the box saying the business has closed, enter the date final wages were paid, and attach a statement naming who keeps the payroll records and where (IRS).
- Give each employee a Form W-2 by the due date of the final Form 941 or 944, file Form W-3 to send Copy A to the Social Security Administration, and file a final Form 940 for the year final wages were paid. Employers with tipped staff also file Form 8027.
- Report payments to contractors on Form 1099-NEC.
- Retirement plans: terminating a plan generally means amending it, notifying participants, vesting all affected participants 100%, distributing assets as soon as administratively feasible (generally within 12 months) and filing any final Form 5500 (IRS).
| Law | Who it covers | Notice |
|---|---|---|
| Federal WARN Act | Employers with 100 or more full-time employees; closings affecting 50 or more employees at one site | 60 days, to employees, the state dislocated worker unit and the local chief elected official |
| California WARN | Establishments with 75 or more full- and part-time employees | 60 days, with extra local recipients |
| New York WARN | Private employers with 50 or more full-time employees in the state; closings affecting 25 or more | 90 days |
Notify creditors and pay debts in the right order
List every creditor: lenders, landlords, suppliers, tax agencies and customers with prepaid balances. Many states have a formal notice process that limits how long creditors can wait. In Washington, a dissolved corporation can send known creditors a written notice with a deadline of at least 120 days; a known claim not delivered by then is barred (RCW 23B.14.060).
Pay liabilities in the order of priority the law sets, then distribute what is left to owners (RCW 23B.14.050). Pay withheld payroll taxes before other bills: the IRS treats paying other creditors while employment taxes go unpaid as a sign of wilfulness for the Trust Fund Recovery Penalty (IRS).
If debts are larger than assets, speak to your lawyer and accountant before ending the lease, selling equipment or disconnecting utilities. The SBA advises building a plan to present to creditors, whose cooperation you need.
Source: Washington RCW 23B.14.060: known claims against a dissolved corporation
Final tax returns: the IRS steps for closing a business
The IRS closing checklist has six steps: file a final return and related forms, take care of employees, pay the tax you owe, report payments to contract workers, cancel your EIN and close your IRS business account, and keep your records. An LLC files according to how it is taxed: as a partnership, a corporation or an entity disregarded from its owner.
- Close the EIN account by letter: give the legal name of the business, the EIN, the business address and the reason for closing, and enclose a copy of the EIN assignment notice if you kept it. The IRS cannot close the account until all returns are filed and all taxes paid.
- A corporation recognises gain or loss when it distributes its assets in a complete liquidation, with the assets valued at fair market value (Form 966 instructions).
- File final state returns too, including sales tax, and notify state tax agencies (SBA). In California, an entity that files its final return on time, stops doing business and files with the Secretary of State within 12 months may avoid further minimum tax (FTB Publication 1038).
| Business type | Final federal return | May also need |
|---|---|---|
| Sole proprietor | Schedule C with your Form 1040 for the year you close | Schedule SE if net earnings are $400 or more; Form 4797 for business property sold; Form 8594 if you sell the business |
| Partnership | Form 1065 with the "final return" box checked and final K-1s | Schedule D; Form 4797; Form 8594 |
| C corporation | Form 1120 marked final; Form 966 within 30 days of the dissolution resolution | Schedule D; Form 4797; Form 8594 |
| S corporation | Form 1120-S marked final with final K-1s; Form 966 | Schedule D; Form 4797; Form 8594 |
Source: IRS: Closing a business
Cancel licenses, permits, leases and contracts
Cancel the registrations, permits, licenses and business names you no longer need, including your trade name, to protect your finances and reputation, the SBA advises.
- State and local: business and professional licenses, sales tax permits, payroll tax accounts, trade name filings and registrations in other states.
- Leases: read the termination and early-exit clauses, and agree a surrender date with the landlord. A personal guarantee you signed survives the company (Alper Law), so negotiate its release as part of the exit.
- Customer and supplier contracts: check notice periods, prepaid balances you owe back and whether a contract can be transferred to a buyer. In an ABC, anti-assignment clauses in leases and contracts still bind (Mayer Brown).
- Receivables: collect what customers owe before you close. Collecting assets is part of the winding up a dissolved corporation may do (RCW 23B.14.050).
- Software subscriptions: export the data first. See the records sections below.
Source: SBA: Close or sell your business
Business liquidation: how to sell the assets
Business liquidation means turning a company's assets into cash, paying its creditors and passing anything left to the owners. The SBA calls it usually a last resort, after no buyers, mergers or successors appear, and it still needs a sound plan.
- Prepare an inventory and decide which assets to sell.
- Have a qualified appraiser set the liquidation value, then estimate net proceeds and re-evaluate the decision.
- Choose the sale type, the timing and the location.
- Use a non-recourse bill of sale so the buyer accepts the associated risk.
- Report each sale of business property on Form 4797 with the final return.
| Route | How it works | Suits |
|---|---|---|
| Sell the business | A buyer takes over the business or its assets in one deal; file Form 8594 if you sell your business | A business whose customers, staff or brand are worth more together |
| Owner-run liquidation | You sell inventory, equipment and other assets yourself, by negotiated sale, consignment, internet, sealed bid or retail sale | Small businesses that can pay their debts |
| Auctioneer or dealer | An auctioneer, dealer or other expert runs the sale | Equipment, vehicles and inventory |
| Assignment for the benefit of creditors | An assignee chosen by the company takes all assets, sells them in bulk, by auction or as a going concern, and pays creditors | Insolvent companies that want a faster, private process |
| Chapter 7 bankruptcy | A trustee appointed by the U.S. trustee liquidates the assets in a federal court case | Insolvent companies that need collection actions stopped |
Source: SBA: Close or sell your business
How long to keep business records after closing
Closing the business does not end record-keeping duties. Keep the records that support each tax return until its period of limitations runs out, and before discarding anything, check whether insurers or creditors need it kept longer (IRS).
- Disputes override these periods. Once an EEOC charge is filed, keep the related personnel records until the charge and any lawsuit based on it are finally resolved (EEOC). Treat any record tied to a claim or lawsuit the same way.
- Name a custodian. The final Form 941 or 944 must say who will keep the payroll records and at what address.
- Check your state's rules as well as these federal ones.
| Record | Keep for at least | Source |
|---|---|---|
| Records supporting income tax returns | 3 years in most cases; 6 years if unreported income is more than 25% of the gross income shown; 7 years for a bad debt or worthless securities claim; indefinitely if no return or a fraudulent return was filed | IRS |
| Employment tax records | 4 years after the tax is due or paid, whichever is later | IRS |
| Property records | Until the period of limitations ends for the year you dispose of the property | IRS |
| Payroll records, collective bargaining agreements, sales and purchase records | 3 years | DOL Fact Sheet 21 |
| Time cards, wage rate tables, work schedules | 2 years | DOL Fact Sheet 21 |
| Personnel and employment records | 1 year; for an employee terminated involuntarily, 1 year from termination | EEOC |
| Employee benefit plan documents | The life of the plan and at least 1 year after it ends | EEOC |
| Form I-9 | 3 years after hire or 1 year after employment ends, whichever is later | USCIS |
Before you delete company systems, check what the records are worth
A shutdown checklist usually ends by cancelling subscriptions, and that deletes the email, chat, ticketing and code archives with them. Two checks come first.
Checking the value takes minutes: see what your company's records are worth from six questions about the business, before any system is cancelled.
- Retention: keep what the law requires (see the table above) and preserve anything tied to a dispute.
- Value: operational records such as support tickets, work orders, email and chat archives and code repositories can be licensed to AI developers. AI labs are buying data from dead startups to train their models, MIT Technology Review reported in October 2026, and Fast Company reported that shuttered startups are selling old Slack chats and emails to AI companies.
- Privacy: these archives carry staff and customer details. Suppliers scrub personally identifiable information and exclude HR records, according to MIT Technology Review. See how to de-identify company data.
Source: MIT Technology Review: AI labs buying data from dead startups (Oct 2026)
How to keep that option open
Export first, keep admin access and describe what you hold at company level: the systems, years covered and approximate volume. The data inventory template gives the columns. The deals tracker lists public prices as reported.
Money from licensing records is company money like any other sale proceeds, so it goes to creditors before owners. For the details, see selling company data after closing, how Origin helps companies winding down and, if the company is insolvent, selling company data in an ABC.
Wind-down timeline: what happens when
The order varies by state and by whether the company can pay its debts. Each rule is sourced in the sections above. A typical sequence for an employer:
| When | What | Rule |
|---|---|---|
| 60 to 90 days before the last working day | WARN notices, if covered | 60 days federal and California; 90 days in New York |
| Decision day | Board and owner vote; written resolution | Form 966 within 30 days for a corporation |
| Last working day | Final wages | Immediately on discharge in California; check your state |
| Quarter final wages are paid | Final Form 941 or 944; W-2s to employees by its due date | IRS closing checklist |
| After the plan termination date | Retirement plan assets distributed | Generally within 12 months |
| Tax year of closing | Final income tax return, final Form 940, Forms 1099-NEC | IRS closing checklist |
| After the final return | Dissolution or cancellation filed with the state | California: within 12 months of the final return; Delaware: franchise taxes paid first |
| After dissolution | Written notice to known creditors with a claims deadline | Washington: at least 120 days |
| Once all returns are filed and taxes paid | Letter to the IRS closing the EIN account | IRS closing checklist |
| 3 years after dissolution | A Delaware corporation's continued existence for lawsuits and winding up ends, unless the Court of Chancery extends it | Delaware Code |
| 4 years or more | Employment tax records may be discarded, if no other rule or dispute applies | IRS |
Next step
Start with the written decision and one list of every account, creditor, employee and system. If the company holds years of tickets, work orders, chat or code, describe them before anything is cancelled; no export is needed to find out whether they are worth licensing.
Origin Data Partners is independent and is not affiliated with any AI data buyer. We help owners compare buyers and find the best fit for their records. See what your data is worth.
Common questions
How do I close a business?
Record the owners' decision in writing, give employees notice and pay final wages, notify creditors and pay debts, sell or distribute the assets, file final federal and state tax returns, file dissolution or cancellation papers in every state where the business is registered, cancel licenses and permits, close the IRS business account and keep the records the law requires. The order varies by state.
Can I close my LLC and just walk away?
Not safely. Until you file dissolution or cancellation papers, the state keeps charging taxes and fees: a California LLC owes $800 a year until it is cancelled, even with no business. Unpaid withheld payroll taxes and personal guarantees can also follow owners personally. An insolvent company can hand everything to an assignee in an assignment for the benefit of creditors, but that does not discharge its debts.
What forms do I file with the IRS when closing a business?
A final income tax return with the final box checked (Schedule C, Form 1065, 1120 or 1120-S), plus Form 4797 for business property sold and Form 8594 if you sell the business. Employers also file a final Form 941 or 944 and Form 940 and issue W-2s; contractors get Form 1099-NEC. A corporation files Form 966 within 30 days of adopting a plan to dissolve. Then write to the IRS to close the EIN account.
How long do you have to keep business records after closing?
Keep most income tax records 3 years after filing, employment tax records at least 4 years, records for a bad debt or worthless securities claim 7 years, and records indefinitely if a return was not filed. Federal wage law requires payroll records for 3 years, and Form I-9 must be kept 3 years after hire or 1 year after employment ends, whichever is later.
Do I have to give employees notice before shutting down a company?
Under the federal WARN Act, an employer with 100 or more full-time employees generally must give 60 days' written notice of a closing that affects 50 or more employees at one site. California's law covers establishments with 75 or more employees, and New York requires 90 days' notice from employers with 50 or more full-time employees in the state. Final pay timing is set by state law.
What is business liquidation?
Turning a company's assets into cash, paying its creditors and distributing anything left to the owners. Owners can run it themselves or hire an auctioneer or dealer. An insolvent company can use an assignment for the benefit of creditors or Chapter 7 bankruptcy, where an assignee or a court-appointed trustee sells the assets.
How do I cancel my EIN when I close my business?
Send the IRS a letter with the business's legal name, EIN, address and the reason for closing, with a copy of the EIN assignment notice if you kept it, to Internal Revenue Service, Cincinnati, OH 45999. The IRS will not close the account until all returns are filed and all taxes are paid.
Sources and further reading
Origin Data Partners is independent and not affiliated with any buyer named on this page.
- IRS: Closing a business
- IRS: How long should I keep records?
- IRS: Form 966, Corporate Dissolution or Liquidation, with instructions
- IRS: Employment taxes and the Trust Fund Recovery Penalty
- IRS: Terminating a retirement plan
- SBA: Close or sell your business
- SBA: Choose a business structure
- U.S. Department of Labor: Last paycheck
- U.S. Department of Labor: WARN Act employer's guide
- California Labor Commissioner: paydays and final wages FAQ
- California EDD: WARN requirements for employers
- New York State Department of Labor: WARN
- EEOC: Recordkeeping requirements
- U.S. Department of Labor: FLSA recordkeeping (Fact Sheet 21)
- USCIS: Retaining Form I-9
- New Jersey Division of Taxation: consequences of not dissolving a corporation
- California Franchise Tax Board: limited liability company annual tax
- California Franchise Tax Board: Publication 1038, dissolve, surrender or cancel a business entity
- Delaware Code, Title 8, sections 275 to 278 (dissolution)
- Delaware Division of Corporations: annual report and tax information
- Washington RCW 23B.14.060: known claims against a dissolved corporation
- Washington RCW 23B.14.050: effect of dissolution
- Alper Law: personal guarantee liability
- U.S. Courts: Chapter 7 bankruptcy basics
- Mayer Brown: ABC, assignments for the benefit of creditors (Feb 2023)
- Fairfield and Woods: ABCs, an alternative to bankruptcy liquidations (Apr 2023)
- MIT Technology Review: AI labs buying data from dead startups (Oct 2026)
- Fast Company: shuttered startups are selling old Slack chats and emails to AI companies (Apr 2026)