Closing your Arizona Limited Liability Company (LLC) can be a challenging and difficult task. You may be facing legal matters such as settling debt or protecting personal property and there will always be taxation issues to resolve. The choice to close a business is never easy, and you should gather resources and support as you begin the process. There are many resources that can help you navigate this process including IRS’s website Closing a Business | Internal Revenue Service (irs.gov) and the SBA’s website Close or sell your business (sba.gov). We also recommend retaining legal counsel and accounting support to help make the process as smooth as possible.
Here are some of the steps you will need to take in closing your LLC.
File final tax returns
LLCs that file partnerships or corporation tax returns must file a final return for the year the business closes. If your LLC is a single member LLC and its income is reported on your personal tax return, you do not need to file a final tax return for the business with either the IRS or the State of Arizona. You should, of course, continue to file your personal income tax returns with both.
If your business had employees, you were probably filing employment tax returns with the IRS and the State of Arizona. If so, file final Form 940 and 941 with the IRS, and file a final Arizona withholding tax return, one of the A-1 forms.
You may have had an Arizona business license. If you did, file a final transaction privilege tax return (Form TPT-1 is the Arizona sales tax return) with the Arizona Department of Revenue. This will cancel your business license.
For any contract workers you paid at least $600 for services in the year you close, you must report the payments to the IRS using Form 1096 and one of the 1099 series.
Work with IRS and Arizona Department of Revenue to make payments on any taxes due
In the event your business owes taxes to the IRS or Arizona, you have several options for payment plans. Here is a link to the IRS website that gives you a good summary of your choices. Payments | Internal Revenue Service (irs.gov)
To set up a payment plan with the State of Arizona, go to Payment Arrangement for Individuals | Arizona Department of Revenue (azdor.gov) to see information on how to set up such a plan.
Legally dissolve the LLC
If your articles of organization did not say that the LLC’s life period would end on a particular date or on the occurrence of a particular event, the life period of the LLC is presumed to be perpetual. This means that you can let the LLC become dormant by doing nothing (not recommended). If you decide to have the LLC dormant, you do need file a change of address form with the Arizona Corporation Commission. A fillable form can be found at APPLICATION FOR RESERVATION (azcc.gov).
If you want to close your LLC legally and permanently, you need to complete Articles of Dissolution and file with the Arizona Corporation Commission. A fillable form can be found here: Microsoft Word – A4D085FC.doc (azcc.gov). By signing the Articles of Dissolution, you certify that you have paid all the debts of the LLC. Consider retaining legal counsel if this is an issue.
If you are going to close the LLC legally, you should also cancel your taxpayer ID number with the IRS. This involves sending the IRS a letter along with certain documentation. Let us know if you need help with this.
Cancel permits and licenses
Go through your records and find all the permits and licenses you received for your LLC This may include a resale license, business or tax license, food preparation permits, and a liquor license. For each license, contact each city, county, or state office that issued the licenses and cancel them.
Contact service providers
Contact service providers such as utilities and insurers to inform them of the final day of service and provide an address for final billing.
Close business bank accounts and credit cards.
There is a lot to do and a lot to remember as you close your business. Give R&A a call if we can be of help.
About this Author
Susan is experienced in tax research, not-for-profit taxation, trusts and estates, and sales tax. She has prepared tax returns for pubic charities, private foundations, and charitable trusts as well as unrelated business income tax returns for numerous charities.