Filing a “final” return for an LLC depends on how the LLC is classified for federal income tax purposes. An LLC can be treated as (1) a disregarded entity (single member), (2) a partnership (multi-member, no corporate election), or (3) a corporation (C corporation or S corporation election). The IRS’s closing-business guidance focuses on filing all required final returns and properly marking the final return indicators where applicable. 

Step 1: Identify how the LLC is taxed for income tax purposes

Use the LLC’s federal tax classification (default rules and any elections) to determine which “final” income tax return applies: 

Single-member LLC (no corporate election): reported on the owner’s return (disregarded entity)

Multi-member LLC (no corporate election): Form 1065 partnership return

LLC electing C corporation treatment: Form 1120

LLC electing S corporation treatment: Form 1120-S

You may also need to address late S corporation elections if the LLC wants to be treated as an S Corp but missed the original Form 2553 filing deadline (generally 2 months and 15 days after the beginning of the tax year the election is to take effect). In some cases, the IRS may grant relief for a late S election when the entity meets specific requirements and can show reasonable cause for not filing Form 2553 on time, typically by including a reasonable cause explanation on Form 2553 or in an attached statement.

Step 2: File the final income tax return for the short year or final year

File a return covering the LLC’s last tax year (often a short period ending on the date the business stops operating or the entity terminates, depending on facts and entity type). 

For returns that have a “final return” indicator, check it: 

Partnership (LLC taxed as partnership): file Form 1065 and check the “Final return” box on Form 1065; also check the “Final K-1” box on each Schedule K-1 issued to partners.

S corporation (LLC taxed as S corporation): check the “Final return” box on Form 1120-S and check the “Final K-1” box on each Schedule K-1 issued to shareholders.

C corporation (LLC taxed as C corporation): check the “Final return” box on Form 1120 if the corporation will no longer exist.

If the LLC is a disregarded entity (single member) and you report the activity on Schedule C/E/F (as applicable), there is typically no separate “final return” checkbox for the LLC itself on a standalone entity return because no separate entity income tax return is filed; instead, you report the final year of activity on the owner’s return and stop filing in future years if there is no continuing activity. Our tax experts at Monily are well-versed in this subject matter and can swiftly assist you, should you feel any complexity.

Step 3: File final employment tax returns if the LLC had employees

If the LLC had employees, you generally must file final employment tax returns for the period in which you paid final wages. For example: 

Form 941 includes a checkbox and entry for the final date wages were paid when the business has closed or stopped paying wages, and the IRS requires an attached statement about who is keeping payroll records and where they will be kept (per IRS instructions/guidance).

Form 940 instructions include a “Final: Business closed or stopped paying wages” indicator (checkbox) when you will not be liable to file FUTA returns in the future.

Step 4: File final information returns (W-2/1099) if applicable

If you paid employees or contractors during the final year, you may still have year-end reporting obligations, such as: 

W-2/W-3 for employees

1099-series forms (for example, reporting payments to contractors when required)

Step 5: Address the EIN and IRS business account

If you no longer need the EIN, the IRS explains that an EIN cannot be cancelled, but the IRS can deactivate the business account when you notify them that the business has closed and you no longer need the EIN. 

Step 6: Keep records

Retain business records for the required period (the IRS emphasizes record retention as part of closing a business). 

State law note 

LLC dissolution/withdrawal filings, final state income/franchise returns, state payroll filings, and any state/local sales tax or property tax wrap-up are administered at the state (and sometimes local) level. The controlling authority is the applicable state revenue department/tax agency (and, for entity dissolution filings, typically the state business filing office). For professional support and assistance, our tax team is here for you.

Sources 