Dissolving an LLC

Written Mar 20, 2019 by Dan Nicholson

"When dissolving an LLC, do you need to fill out IRS form 966?"

The answer will be yes or no depending on how your entity is recognized for tax purposes. An LLC is not a recognized entity by the IRS. By default, a single-member LLC is organized for tax purposes as a sole proprietorship and a partnership for tax purposes if there is more than one member. However, you can make an election to be taxed as a C Corporation (i.e., an LLC for legal purposes that is taxed as a C Corporation for tax purposes).

You must complete and file form 966 when dissolving an LLC if you have elected to be a C Corporation or a Cooperative (Coop) for tax purposes. S Corporations and tax-exempt non-profits are exempt from filing this form (see here).

If you are organized for tax purposes as an S Corporation you would file your taxes via form 1120S for the last time and check the box indicating that your return is a “Final Return.” Same is true for a Partnership, but with form 1065.

On a state and local level, best practice is to check with your state and local agencies for requirements.

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