Once you officially close your LLC, you must also close your business bank account-after settling all debts, paying final taxes, and distributing any remaining funds.
Dissolving your LLC means more than just ceasing operations. It involves a formal shutdown process that includes winding down finances, notifying the IRS and your state, and canceling accounts and licenses. One key part of this process is closing your business bank account. Leaving it open after your LLC is dissolved can cause compliance issues and unwanted tax confusion.
Contents
1. You Can’t Leave the Account Open Indefinitely
Once your LLC is no longer active, your business bank account becomes legally pointless-and potentially problematic. Business bank accounts are tied to the existence of your LLC as a legal entity. If the LLC no longer exists, the account has no proper authorization to remain open.
Banks typically require documentation (like Articles of Dissolution) to officially close the account. You may also need to settle any remaining fees or pending transactions before they will process the closure.
2. Settle Debts and Expenses First
Before closing your bank account, use it to resolve any outstanding business obligations. This includes:
- Paying final vendor invoices or service providers
- Settling outstanding business debts or credit card balances
- Final payroll and employment tax payments, if applicable
- Sales tax or franchise tax owed to your state
Failing to settle these obligations could result in lawsuits, damage to your credit, or state-level collection actions-even after your LLC is dissolved.
3. File Final Tax Returns
You should only close your business bank account after all necessary federal, state, and local tax filings are completed. Depending on your LLC’s structure, this could include:
- Schedule C for single-member LLCs
- Form 1065 and Schedule K-1s for multi-member LLCs
- Final payroll tax filings if you had employees
- Final state income or franchise tax returns
You may need to check a “final return” box on your last filing. After your taxes are filed and any payments are made, you can safely move on to the final financial steps.
4. Distribute Remaining Funds to Members
After all liabilities are paid and tax obligations are handled, you can distribute the LLC’s remaining funds to yourself (and any co-owners, if applicable). These final distributions should follow the percentages or agreements outlined in your LLC’s operating agreement.
Example: If your LLC’s account holds $10,000 after final expenses and you own 100% of the business, you can transfer that amount to your personal account. If you and a partner split the LLC 50/50, each of you would receive $5,000.
5. Close the Bank Account
Once the funds are distributed, you can contact your bank to close the LLC account. They may ask for:
- Photo ID and account verification
- Official Articles of Dissolution or a letter of resignation (depending on the bank)
- Signature confirmation from all authorized account holders
Many banks require the account to have a $0 balance before they will officially close it, so be sure to transfer or withdraw all remaining funds beforehand.
6. What Happens If You Don’t Close It?
If you dissolve your LLC but forget to close the business bank account, several issues can arise:
- You may continue to incur monthly account maintenance fees
- Tax confusion could result if interest is earned or transactions continue
- The account may be flagged or frozen by the bank for inactivity or invalid business status
- You risk blurring the legal line between personal and business finances
In some cases, dormant accounts may be turned over to the state as unclaimed property after a period of inactivity.
7. Close Business Credit Cards Too
Don’t forget to cancel any business credit cards or lines of credit associated with your LLC. Just like the bank account, they’re tied to the business entity, and keeping them open can expose you to ongoing fees or fraud risk.
If you used personal guarantees for those cards, you may remain liable for balances even after closing the business, so be sure to pay off all debts before closing the accounts.
Closing your business bank account is a necessary part of shutting down your LLC properly. Do it only after settling debts, filing final taxes, and distributing any remaining funds. Leaving it open can create unnecessary legal and financial complications. Wrapping up your LLC the right way-including your banking-gives you a clean slate to move forward with your next venture.
