Many foreign founders set up U.S. companies with the best of intentions—launching products, raising money, or selling into the American market. But not all ventures last forever.
Whether your business didn’t take off, you’ve moved operations elsewhere, or you simply want to wind things down, properly closing your U.S. company is a critical step. If you don’t, the IRS and state authorities may continue to expect filings and fees, leading to penalties that pile up over time.
Closing a U.S. company is not as simple as just walking away. It requires careful attention to both state-level dissolution and federal tax filings. This guide explains what’s involved, common mistakes to avoid, and where foreign founders can turn for help.
State-Level Dissolution
Every U.S. company is formed in a state, such as Delaware or Wyoming. To legally shut down the company, you must file Articles of Dissolution (for corporations) or a Certificate of Cancellation (for LLCs).
Until this is done, the company remains active in state records, and annual obligations like franchise tax or annual reports continue to apply.
- Delaware LLCs – Must file a Certificate of Cancellation with the state and pay any outstanding franchise tax ($300 per year for LLCs). If you don’t file, the state will keep assessing the tax plus penalties.
- Delaware Corporations – Must file a Certificate of Dissolution and pay all due franchise taxes. Corporations are also required to submit a final annual report before dissolution.
- Wyoming LLCs – Must file Articles of Dissolution with the Secretary of State and pay any annual reports due. Failing to do so means the company remains active, and late fees continue to accumulate.
Without formally dissolving, the state still considers your company alive, which means obligations keep rolling forward even if you’ve abandoned the business.
Example
A founder from Brazil set up a Delaware LLC but stopped using it after a year. He assumed that ignoring the company would make it disappear. Two years later, he received notices from Delaware showing unpaid franchise taxes, late fees, and penalties.
What could have been a $300 closure fee turned into thousands of dollars in debt.
Federal IRS Requirements
Dissolving at the state level is only part of the process. The IRS must also be informed that your company has ceased operations. That means filing a final federal tax return.
- Corporations (Form 1120) – The final return must be checked as “final” and include income through the date of dissolution.
- Partnerships (Form 1065) – Must file a final return with K-1s issued to all partners.
- Foreign-Owned Single-Member LLCs (Form 5472 with pro forma 1120) – Must still file their final year’s 5472 before closing. The IRS penalties for missing Form 5472 are $25,000 per year, so this is a critical step.
Failing to file these returns means the IRS continues to expect them annually, and penalties can accumulate even if your company has no income.
Example
A founder from the U.K. dissolved his Delaware corporation at the state level but forgot to file a final Form 1120. Two years later, the IRS assessed penalties for non-filing, creating stress and unnecessary costs.
Simply filing the final return at the time of dissolution would have prevented the issue.
Common Mistakes Foreign Founders Make
- Letting the company lapse – Some founders assume that if they ignore annual reports or franchise taxes, the state will eventually dissolve the company for them. While that may happen, it often takes years, and penalties accumulate during that time.
- Forgetting the IRS – Dissolving at the state level but failing to file final federal returns is one of the most common mistakes, and one of the most expensive.
- Overlooking foreign reporting obligations – Foreign-owned entities often have extra forms like 5472 or 5471. These must be filed in the final year as well.
- Not keeping records – Even after dissolution, it is important to keep company records and final tax filings for several years in case of questions.
Who Can Help with Dissolution
Bookmate does not handle state-level dissolution filings. Our focus is on federal tax compliance—making sure your final IRS filings are completed properly so you don’t face penalties later. However, many of our clients have successfully worked with services that specialize in dissolving companies, such as:
- ClickDissolve
- Starcycle
These companies help with the paperwork and filing requirements at the state level. Once the dissolution is processed, Bookmate can step in to handle the final IRS tax filings so everything is fully closed out.
How Bookmate Fits In
While we do not file dissolution paperwork with the state, Bookmate ensures that the federal side is taken care of. We prepare and file your final 1120, 1065, or 5472, mark the returns as final, and confirm the IRS has accepted them. Without this step, the IRS continues to expect annual filings.
By partnering with a dissolution service for the state filings and Bookmate for the IRS compliance, you can fully close your company without lingering obligations.
Learn more at trybookmate.co or book a free consultation today.
Final Thoughts
Closing a U.S. company as a foreign founder is more than just walking away. It requires action at both the state and federal levels. Forgetting one or the other can lead to penalties, interest, and years of unnecessary stress.
The good news is that with the right partners—state-level dissolution services like ClickDissolve or Starcycle, combined with Bookmate for federal filings—you can shut down your U.S. company properly and move forward with peace of mind.
