Nobody closes a company by stopping work

Figures relate to tax year 2025-26 (UK) · 2025 (US)

A company ends when a state says it has ended. Emptying the bank account and letting the website lapse does not do it, and nor does telling your accountant you have finished.

Until the dissolution is filed, a US LLC keeps accruing state charges and keeps owing federal forms.

Owners find this out three or four years later, and usually from a demand.

Key takeaways

• A US LLC exists until the state of formation dissolves it.
• Abandoning it leaves filings and franchise tax running.
• A foreign-owned single member company files Form 5472 every year.
• The penalty for missing that form starts at $25,000.
• You dissolve in the formation state and deregister in every other.
• A final federal return must be marked as final.
• The EIN survives, though the IRS account can be closed by letter.
• Do the state work before the bank account closes.

Does a US LLC have to be dissolved in its home state?

Yes, and that is the step people skip. You file articles of dissolution or cancellation with the state that formed the company, pay whatever is outstanding first, and receive confirmation. Until that certificate exists, every annual obligation keeps running regardless of what the company does.

Settle the franchise tax before filing, because most states refuse otherwise.

Keep the certificate permanently, since it is the only proof.

What about other states?

Each state where the company registered to do business needs its own withdrawal filing. A Delaware company qualified in New York and Texas therefore has three pieces of paperwork, not one. Missing a withdrawal leaves that state billing a company that no longer exists anywhere else.

Our guide to state tax for expats covers the state layer.

List every state you ever registered in before you start.

What about the registered agent?

Keep paying them until the dissolution is confirmed, because the state serves notices through them. An agent who resigns leaves the company in default, which blocks the dissolution you are trying to file. Cancel the agent after the certificate arrives, not before.

Tell the agent what you are doing so they expect the filings.

Most agents will handle the dissolution paperwork for a fee.

When should the bank account close?

Last, not first, and this ordering catches almost everybody. You need the account to pay the outstanding franchise tax and any final liabilities, and paying a state from a personal account afterwards is awkward. Close it once the certificates are in hand.

Leave enough in it to cover the final bills.

Reopening a closed American account from Britain is close to impossible.

Does closing a US LLC need a US address?

Not a physical one, though you do need an address the state and the IRS can write to. Your registered agent supplies that until the dissolution completes. A British address on the final return is perfectly acceptable, and the IRS handles them routinely.

Keep the agent on until the certificate comes through.

Then redirect anything outstanding to your own address.

How long does closing a US LLC take?

A few weeks in a fast state and a few months where back tax has to be cleared first. Delaware processes a clean dissolution quickly once the franchise tax is paid, while a company in default takes longer. Plan for a quarter rather than a fortnight.

Start before your year end if you want to stop the next filing.

A dissolution dated in January still needs a return for that year.

What does closing a US LLC cost?

State fees are modest, often under a few hundred dollars, and the real cost is the back tax and the professional time. A clean company closes cheaply. One with four years of unfiled forms and accrued franchise tax costs a great deal more than that.

Our guide to an IRS payment plan from abroad covers paying what is owed.

The cheapest closure is the one you do promptly.

Can you sell a US LLC instead of closing it?

Sometimes, and a buyer takes the history along with the name. A clean company with a filing record and a working bank account has modest value to somebody wanting a quick start. One with unfiled forms has none, because the penalties follow the company rather than you.

Disclose everything, since a buyer inherits the open years.

Most dormant shells are simply not worth selling.

Can you reopen a dissolved US LLC?

Some states allow a revival within a window, usually by paying everything owed plus a fee on top. It is possible and it is rarely cheap, and after a few years the name may have gone to somebody else. So treat dissolution as final.

Reviving a Delaware company costs more than forming a fresh one.

Nobody should rely on being able to undo it.

What if a US LLC owes money?

Settle what you can and tell the state before you file anything. A company dissolved with debts outstanding can leave creditors chasing the members in some states, especially where the assets went out first. So pay the liabilities before taking anything for yourself.

Our guide to a director's loan account covers money taken out.

Distributions ahead of creditors are the risky step here.

What if your US LLC held property?

Then taking it out is a disposal at market value, and a gain can arise even where no money changes hands. A company holding American real estate also brings withholding rules into play on the transfer. So model that before you dissolve anything.

Our guide to US property for UK residents covers the property rules.

Move the asset before dissolution, not afterwards.

Should you keep it dormant instead?

Only if you will genuinely use it again within a year or two. Keeping it alive means franchise tax, an agent fee and an annual federal form indefinitely, which is a real cost for an option you may never take. Most people are better off closing and reforming later.

Forming a new company later costs less than four dormant years.

The old name is rarely worth the carrying cost.

What about sales tax registrations?

Every sales tax permit needs cancelling in its own state, and a final return filed for each. Permits left open generate estimated assessments where no return arrives, and those assessments are a nuisance to unwind from Britain. Deal with them before the dissolution.

Our guide to US sales tax for UK sellers covers the permits.

Marketplace sellers often hold permits they have forgotten.

What about payroll accounts?

Close the federal employment tax account and every state withholding and unemployment account. Final payroll returns are due even for a quarter with no wages, and unemployment accounts in particular keep producing demands. Each state wants its own closure, not a general notice.

Our guide to shadow payroll arrangements covers payroll across borders.

Issue final wage statements to anybody you employed.

What has to happen, and where

What does the IRS want from a closed US LLC?

A final return, and until then the ordinary annual filings. According to IRS guidance on closing a business, you file a final return marked final and settle any employment tax accounts. A foreign-owned single member company also keeps filing its information return until it is actually dissolved.

Dormancy is not an exemption from anything federal.

A company with no income still has a filing duty.

How is a final US LLC return marked?

There is a box on the return for a final filing, and ticking it tells the IRS no more are coming. Forgetting it is why people keep getting notices years later about returns nobody owes. The box matters more than it looks.

Our guide to amending a US return covers corrections.

Check the box on the state return as well.

Can you cancel the EIN?

Not exactly. An employer identification number is never reissued or deleted, though you can ask the IRS to close the business account attached to it. IRS guidance on closing a business says a letter giving the number, the legal name and the reason is enough to do it.

Send the letter after the final return, not before.

Keep a copy, because nothing is confirmed by return post.

What is the Form 5472 trap?

A single member company owned by a non-American files Form 5472 with a skeleton corporate return every year, reporting dealings with its owner. The penalty for missing it starts at $25,000 per year, per form. Owners who stopped trading and stopped filing commonly carry several of those.

Our guide to delinquent information returns covers catching up.

The form is due even in a year with no transactions at all.

Why does a dormant US LLC still cost money?

Because the state charges for the privilege of existing, not for trading. Delaware takes an annual franchise tax of $300 whether you trade or not, and California takes a minimum of $800. Those charges accrue quietly, with penalties and interest on top, until somebody formally ends the company.

Our guide to Form 5472 for UK owners covers the federal filing.

Five dormant years in California costs more than most people's original setup.

What happens if you abandon a US LLC?

The state eventually forfeits or administratively dissolves the company, but not cleanly and not quickly. The debt stays attached to it, your name stays on the record as a responsible person, and reviving it later to sign anything becomes expensive. Walking away postpones the problem rather than solving it.

Our guide to UK company strike off covers the British equivalent.

Administrative dissolution is not the same as a clean exit.

What if the US LLC was taxed as a partnership?

Then a final partnership return goes in with final member statements, and the members pick up their shares. Capital accounts need closing out properly, which is fiddly where somebody put money in and never took it back. Get the closing balances right before you file.

Our guide to a UK LLP and Form 8865 covers partnership reporting.

A negative capital account on a final return invites questions.

What if you elected corporate treatment?

Then the liquidation rules apply, and there is a separate notification of the plan to dissolve. Distributing the assets out is a taxable event measured at market value, so a company holding anything appreciated needs that modelled first. The election makes the exit more complicated.

Our guide to Form 8832 and check the box covers the election.

Revoking the election is not the same as closing the company.

A worked example

Take an illustrative case. A British consultant formed a Delaware company in 2019, traded for two years and then stopped.

He closed the bank account and assumed that was that.

Four years later Delaware wanted franchise tax and penalties, and four Form 5472 filings were outstanding.

The catch-up cost several thousand pounds, and almost all of it would have been avoided by one dissolution filing.

Does a US LLC need anything on the UK side?

Britain taxes you on the profits you took from the company while it traded, and closing it does not reopen that. A final distribution may be a capital receipt, which needs reporting if it brings a gain. So the British work is usually lighter than the American.

Our guide to selling a UK business covers disposals.

Tell HMRC if you had been reporting the company's income.

What about beneficial ownership reporting?

The position has shifted more than once since the rules came in, so check where it stands before assuming a filing is due. Reporting obligations attach to companies that exist, which is another reason to dissolve rather than drift. A dissolved company reports nothing.

Our guide to a UK group's US subsidiary notes the other federal filings.

Keep whatever you filed, since the rules keep moving.

Can you fix years of missed filings?

Usually, and it is better than leaving them. A reasonable cause statement filed with the late forms can get the penalties abated, particularly where the company never traded. The argument is far stronger when you file voluntarily than when a notice arrives first.

Our guide to reasonable cause relief covers the argument.

Go in before the IRS writes, not afterwards.

What records should you keep?

The dissolution certificate, the final returns, the letter closing the business account, and proof the franchise tax was paid. Those four answer anybody who writes about the company afterwards, and somebody usually does. Keep them for at least seven years.

Our guide to a tax transcript request covers checking the federal record.

Scan them, because a state letter may arrive years later.

How to close a US LLC from Britain

1. List every state the company was formed or registered in.
2. Bring the outstanding Form 5472 filings up to date.
3. Settle franchise tax and any state assessments.
4. File the final federal return and tick the final box.
5. File articles of dissolution in the formation state.
6. File withdrawal papers in every other state.
7. Cancel sales tax and payroll registrations separately.
8. Write to the IRS to close the business account, then close the bank.

Mistakes and penalties we see closing a US LLC

The first is closing the bank account first, leaving nothing to pay the franchise tax with.

The second is stopping the annual information return while the company legally still exists, which is where the $25,000 charges come from.

The third is dissolving in Delaware and forgetting the registration in another state.

The fourth is not ticking the final box, so notices keep arriving for years about returns nobody owes.

How US UK Tax Accountants helps

We work out what is actually outstanding first, because almost every client who asks about this has more open filings than they think.

Then we close it in the right order so nothing keeps running. Our business tax service covers the filings.

If you have an American company you stopped using, get in touch before another year turns.

Last reviewed 26 October 2026. This article is general information and not personal tax advice, and state procedures differ.