How to Dissolve a Business in 7 Steps

Dissolving a business is the process of formally shutting down a company, with the outcome being the legal ending of its existence as an operational entity. There are various reasons entrepreneurs go down this path, from unsustainable financial issues, legal requirements to cease operations, or even to align with strategic needs.

It’s important to understand that dissolution doesn’t simply involve companies ceasing to function. It requires a structured process to be followed in order to bring the entity to a close while avoiding legal or financial complications.

We’ve created this article to provide global entrepreneurs with practical insights into each step of company dissolution, enabling company leaders to make informed decisions about their enterprises.

Step 1 – Review Governing Documents

The first step is to review the company’s key foundational documents. For corporations, this is likely to include the articles of incorporation and the company bylaws. Limited liability companies (LLCs) will usually review operating agreements, while partnerships will review the partnership agreements. 

These documents typically set out any specific rules or clauses related to dissolution procedures and what steps are required in certain cases. Additionally, governing paperwork will often outline the correct procedures for handling any outstanding debts and assets.

It’s vital to have a thorough understanding of the rules governing the specific company and its structure. Following general dissolution practices isn’t always going to be sufficient, as different company types tend to have differing common rules. For instance, while an LLC may require approval from its shareholders before dissolution can begin, partnerships tend only to require mutual agreement from partners. 

An early review of documents helps to avoid complications.

Step 2 – Get Approval from Owners or Shareholders

Once the fine details of governing rules have been reviewed, the next step is usually to gain approval from all owners, members, or shareholders. This formal approval is a common requirement for legally compliant dissolution in most jurisdictions.

The type of approval process usually depends on the type of company structure involved. For corporations, it is most common for business leaders to pass a board resolution that expresses the intention to close, which is then followed by a shareholder vote.

In LLCs, the rules in the operating agreement will usually outline the requirement for a membership vote. Where partnerships are concerned, dissolution can often be triggered by agreement between partners. In both cases, the governing documents will outline whether dissolution must be subject to majority or unanimous agreement.

Regardless of the company structure, it is vital to clearly record the outcome of resolutions, votes, and agreements in the official minutes of the relevant meetings. This provides evidence that the decision to dissolve was reached in accordance with rules and regulations. 

Step 3 – File Dissolution Documents with Authorities

After correctly securing approval for dissolution processes to proceed, companies must formally record their intentions with relevant authorities.

Similar to those asking “How do I register my business name?”, this involves producing the specific documentation required by the jurisdiction’s authorities. Typically, these documents will be called either “articles of dissolution” or a “certificate of termination.” 

In essence, these items are designed to formally notify the government that the company is going to cease its operations. Unless they’re produced and filed correctly, the government and any relevant regulators may consider the company active and, therefore, subject to related fees, taxes, and other obligations.

Once the document has been created, company representatives will file it with the relevant authority. This is likely to be an office of the Secretary of State, a registrar of the local government, or other local authority agency related to business.

It’s also important to understand that how and where these documents are filed will vary by jurisdiction. This makes it essential to research beforehand.

Step 4 – Notify Tax Authorities and Settle Obligations

It is not just the central business authority of the jurisdiction that companies must notify. Dissolution must also be declared to local, state, and national tax agencies. 

Failing to take this vital step can mean that the company is considered active, and therefore subject to ongoing tax filing obligations and liabilities associated with this. For instance, if companies neglect to inform tax agencies of dissolution, owners may find themselves still subject to financial penalties when they fail to file returns.

Alongside officially informing the tax agency of dissolution, the following items should be arranged:

• Final tax returns – Companies should arrange filing of final tax returns up to the end date of operations. 
• Account closure – All tax-related accounts should be closed. These may include income tax, payroll tax, and value-added tax (VAT) accounts.
• Responsibility settling – Companies should settle all outstanding tax responsibilities, including paying VAT, sales tax, corporate tax, payroll withholding, and existing unpaid penalties.

Step 5 – Resolve Debts and Obligations

Another key part of the dissolution process is to resolve any outstanding debts and other obligations with creditors. These parties may include supply chain partners, loan providers, and landlords.

Typically, companies will aim to pay off any outstanding loans, contracts, and lease agreements. In some instances, companies will seek to minimize their liability or the immediate impact of dissolution by negotiating settlements or repayment terms. Failure to settle here may also impact future access to resources—particularly relevant to those asking “Can you start an LLC with bad credit?”

In some instances, the company’s assets may not be sufficient to cover all outstanding debts and obligations. With LLCs and corporations, this can be a relatively straightforward matter, as owners are protected from personal liability. However, with partnerships and sole proprietorships, the owners’ personal assets may be subject to forfeiture to settle company debts.

Step 6 – Distribute Remaining Assets

After the debts and taxes have been managed or resolved, attention usually turns to distribution of any remaining company assets. These will usually be divided among owners or members in accordance with the governing documents or agreements. 

Corporations tend to distribute assets in alignment with the number of shares that are held by each shareholder. For LLCs, the details can vary, as distribution of profits—and, therefore, remaining assets—depends on the specific operating agreements. Similarly, with partnerships, the assets will also be divided as per the percentages outlined in the partnership agreement.

It is essential to maintain a high level of transparency throughout this process. All owners and shareholders should be provided with clear records on what assets are remaining, how these have been valued and liquidated, and how the percentage received by each party reflects their stake. Failure to correctly document these distributions can lead to disputes and legal action.

Step 7 – Close Business Accounts and Notify Stakeholders

The final step in the dissolution process is the closing of applicable accounts and the distribution of official notifications to stakeholders.

Accounts that should be closed once all outstanding transactions are complete include:

• Business bank accounts – Any bank accounts—including checking, loan, and merchant accounts—should be officially shut down.
• Supplier accounts – Accounts with all supply chain partners, from raw material providers to shipping companies, should be settled and closed.

In addition, any licenses or permits related to company operations should be cancelled with the relevant authorities or agencies.

It’s also vital to communicate officially with employees, clients, suppliers, and other key stakeholders about the intention to wind up and the date the company will cease to operate. Employees, in particular, should be informed as early as possible about the details of the process, their rights, and any severance or other benefits they’re entitled to.

Finally, entrepreneurs should bear in mind that the date of closing operations may not be the end of their responsibilities. In some jurisdictions, owners are required by law to maintain business records for a set period.

Global Considerations When Dissolving a Business

It’s important to be mindful that dissolution doesn’t just vary depending on company structure, but also on the jurisdiction in which the company is registered. Some jurisdictions, like the U.K., allow for relatively straightforward online application for the dissolution of a company. Other companies require in-person or mailed dissolutions, or even the appointment of liquidators.

When dissolving companies operate across borders, it is vital to understand the specific requirements of the relevant jurisdictions. There can be variations not only in the registration of closure, but also in the rights of employees or shareholders.

As a result, professional consulting services—such as an international business formation consultant—with experience navigating dissolutions in various global jurisdictions can play a key role. They provide invaluable guidance to owners, ensuring a full legal and financial closure in accordance with applicable regulations. As a result, owners can avoid unnecessary liabilities and complications.

FAQs

How to dissolve a business?

Companies must follow the relevant legal steps for the jurisdiction, including filing dissolution documents, paying taxes, settling debts, and informing stakeholders.

How to dissolve a business partnership?

Partnerships typically dissolve through mutual agreement, alongside settlement of debts and filing termination paperwork.

How long does it take to dissolve a business?

It can vary depending on jurisdiction and obligations, but typically anywhere from weeks to months.

Do I need legal help to dissolve a business?

It’s not usually mandatory, but professional guidance can mitigate compliance issues.

What happens if I don’t formally dissolve a business?

Owners can remain liable for taxes, debts, and fees until official dissolution.

References

LexisNexis. (2025). Board minutes—striking off and dissolution. LexisNexis. https://www.lexisnexis.co.uk/legal/precedents/board-minutes-approving-striking-off-dissolution 

UK Government. (2025). Strike off your limited company from the Companies Register. https://www.gov.uk/strike-off-your-company-from-companies-register