How to Dissolve Your Home Business

You might reach a point where it becomes necessary to dissolve your home business. Here are a few things to keep in mind.

When you start a home business, you don't often assume that you will have to dissolve it. Choosing a business organization should have been a careful process, so it's uncommon to get to the point at which you might need to dissolve your LLC or other home business form. Sometimes, though, it's necessary.




State Laws and Dissolving a Home Business

Just as every state has different requirements for setting up a business, each state has its own rules about how the business should be dissolved. In some cases, you are required to dissolve your home business when you move out of state and establish yourself in a new state. But what happens if you decide that you no longer want to run your business in its current form, or if you want to convert it to a different type of business?

My home business is still registered in Utah. I renewed the registration before I moved to Pennsylvania. In Pennsylvania, there is a two-step process for turning an out-of-state business into an in-state business.

The first step is applying to have your business recognized as a foreign entity in the state. Then, once that is done, you can apply to have your business domesticated to the state.

While I was in the middle of this process, things changed. Now I need to dissolve my LLC altogether and I'll need to start a new business in Idaho. (The silver lining here is that Idaho should be a fairly easy and cheap place to accomplish this.)

What's required to dissolve a business

Before all this happens, though, I need to dissolve the LLC still registered in Utah. It's not an onerous process in Utah, from I've read. However, even in the case of Utah, there are a few things that need to happen:

  • Obtain an agreement from members about the dissolution
  • File Articles of Dissolution with the state
  • “Wind up” the business by collecting outstanding amounts owed, getting rid of company assets and property, paying taxes and debts owed, and distributing remaining assets amongst members
  • Providing notices to creditors and claimants


In some states, you have to actually receive a tax clearance before you can dissolve your home business. Utah is not one of those states (lucky me). Every state is different, and your requirements vary according to where the business is registered. After reading the requirements of dissolving an LLC in Pennsylvania, I'm glad I didn't get very far in terms of moving my business across state lines.

Rather than try to do this myself (I've got quite enough on my plate right now thankyouverymuch), I'll get the help of my accountant. He did the paperwork to start the business, so he should be perfectly qualified to file the paperwork to dissolve it.

Don't forget, too, that there might be other requirements involved if you are dissolving your S-Corp or C-Corp. A whole host of laws accompany winding down any business, and you need to understand what they are in your state. And don't forget that business bankruptcy is another matter as well.

Other Things to Consider When You Dissolve Your Home Business

Once you understand the state requirements associated with dissolving your home business, you need to think of other things that go along with closing down your operations. Some of the things to keep in mind as you move forward include:

Determine the new business organization

If you're planning on starting a new home business, you'll need to decide what business organization you'll need. After a conversation with the fabulous Kelly Phillips Erb, I've almost decided that a single-member LLC is the way to go for me, at least for now. I know a lot of other solopreneurs like the S Corp, but due to my rather limited ambitions, I don't see it working for me.

New EIN

You need to let the IRS know what is happening. You'll need to close your business account with the IRS and then apply for a new EIN.

Business bank accounts

When you dissolve your home business, you probably need to close your associated business bank accounts. Most business bank accounts require your EIN. When you dissolve a business, your EIN no longer applies. Your new business will have new information, and that means a new account.

Notify clients of changes

You'll need to notify your clients and others of changes. There's a lot of paperwork associated with your business. You'll have a new EIN, and probably a new address. All of that needs to be communicated to clients, vendors, and others with whom you do business.

Establish new business credit

If you have business credit under your old business, you're going to need to start fresh with your new business. Your personal credit will matter more as you work to establish your credit reputation with a new business.

Once you decide that you need to dissolve your home business, take the time to learn what you need to do, get your ducks in a row and try to keep things as simple as possible.



2 thoughts on “How to Dissolve Your Home Business”

  1. Carol Topp CPA

    Great post. Thanks for sharing the details.
    About closing your EIN…if your business is a sole proprietorship then the IRS only gives you, as an individual, one EIN for all the sole prop business you’ll ever start. The business will just have different names. At least that’s my understanding.
    One of my clients tried to apply for a new EIN for a new business he was starting and was denied because he already had an EIN as a sole prop.
    S Corps and C corps can get unique EINs, I believe.
    Maybe Kelly Erb could weigh in on this.

    1. Miranda Marquit

      That’s a good point. Before doing anything with that, it’s a good idea to get some professional advice. Since I have an LLC, I’ll need a new EIN, since the old LLC will be dissolved completely.

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