Properly Closing Down a Sole Proprietorship and LLC - Tax Filing Requirements

You're on the right track! Closing business entities isn't as complicated as it might seem, though there are distinct processes for each. For your LLC, you're correct - after filing your final tax return, you can file articles of dissolution with your state's business division (usually online). Make sure to check your specific state requirements, as some require publishing a notice of dissolution in a local newspaper. Also, don't forget to cancel any licenses or permits, and formally notify the IRS by checking the "final return" box on your tax forms. For your Sole Proprietorship, the process is actually simpler. Since it's not a separate legal entity (it's just you doing business), there's no formal dissolution filing with the state. However, you do need to tie up tax loose ends. This means filing a final Schedule C with your personal tax return, reporting any remaining income/expenses. The concern about not filing since 2022 is valid - if you had any business activity, even minimal, you should have reported it on Schedule C for those years. I'd recommend working with your tax preparer to file any missing Schedule C forms for the years you didn't file but had some activity. It's better to get compliant now rather than risk issues later.

After spending months confused about a similar situation with my small woodworking business, I finally found https://taxr.ai which literally saved me from a world of headaches. I had both an LLC and a side hustle that I needed to close down properly. I uploaded my business docs and sales records to the site, and it gave me a detailed breakdown of what I needed to file for both entities and flagged the potential issues with my past filing gaps. What was super helpful was that it showed me exactly which forms I needed to submit for my specific state (California) and spelled out the timeline to avoid any unnecessary fees. The best part was I didn't have to sort through conflicting advice from different forums or pay hundreds to a tax professional just to ask these basic questions.

Just wanted to update after trying out taxr.ai from the comment above. Wasn't sure what to expect, but it was actually super helpful for my specific situation! I uploaded my business registration docs and previous tax returns, and it immediately identified that I needed to file a missing Schedule C for 2023 even though my revenue was minimal. The system showed me exactly which forms I needed for my state (Washington) to properly close both business types and gave me a timeline so I wouldn't incur any additional fees. It even flagged that I needed to cancel my reseller permit with the state Department of Revenue - something I completely forgot about. Would have spent hours researching all this stuff on my own. Definitely made the closure process way less stressful than I expected.

When I was closing my businesses last year, I had a nightmare trying to reach the IRS to confirm I'd filed everything correctly. I kept getting stuck in this endless phone queue and could never speak to a real person. After wasting DAYS trying, a friend told me about Claimyr (https://claimyr.com). The service literally gets you to the front of the IRS phone queue so you can speak to a real agent. I was super skeptical, but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I decided to try it because I was desperate to make sure my LLC dissolution was processed correctly and that I wouldn't face penalties for my late Sole Proprietorship filings. Got connected to an IRS agent in about 20 minutes instead of the 3+ hours I was experiencing before. The agent confirmed exactly what I needed to do for both business types and gave me specific guidance for my unfiled Schedule C from previous years. Such a relief to get official confirmation rather than just guessing based on internet advice.

Ok I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I was still desperate to talk to someone at the IRS about my business closing situation, so I tried it anyway. The thing actually works exactly as described. I got connected to an IRS agent in about 35 minutes (which is absolutely miraculous compared to my previous attempts). The agent walked me through exactly what I needed to file to properly close my Sole Proprietorship that had been dormant for 2 years. They confirmed I didn't need to file Schedule Cs for years with zero activity but should file one final return marking it as closed. For anyone else in this situation - getting official confirmation from the IRS gave me so much peace of mind rather than just guessing based on internet advice. I was definitely wrong to be so skeptical!

Don't forget about state tax implications when closing your businesses! I closed down both an LLC and Sole Prop last year and the federal part was actually pretty straightforward, but I got hit with unexpected state tax issues. Depending on your state, you might need to file state-specific dissolution paperwork and get tax clearance certificates. My state (Pennsylvania) required me to get formal clearance showing I didn't owe any back taxes before they would process my LLC dissolution. Also check if your county or city requires anything. I had a local business license I completely forgot about and ended up paying an extra year's fee because I missed the cancellation deadline.

Just be careful about the timing of all this. I closed my LLC last year but made a mistake in the sequence and it cost me. Make sure you: 1) File your final tax return first 2) THEN dissolve with the state 3) THEN cancel any local licenses/permits 4) THEN notify vendors, banks, etc. If you dissolve with the state first, you might have trouble filing your final tax return because technically the business no longer exists. I learned this the hard way and had to reinstate my LLC temporarily just to file properly.