In the context of business, "to dissolve" means to officially close down a company's operations and cease its existence as a legal entity.
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Last Updated: December 16, 2025
The definition of ” dissolve ” varies, depending on the context in which the term is used. In general terms, it refers to separating something into its component parts or bringing something to an end. For business purposes, the word “dissolve” is used in relation to the dissolution of a company or business. To dissolve a company means to close a business, and closing a business can be a complex process.
There are a number of reasons to dissolve a business. These can be financial, personal, or out of necessity.
A business may be dissolved voluntarily or involuntarily, depending on the situation.
The directors or members of a company may decide to dissolve the business because it has served its intended purpose. In some cases, business partners disagree on the future direction of the company and are unable to come to a resolution, thereby causing them to choose dissolution.
Finances can be another reason to dissolve a business. If the company isn’t doing well financially and can’t continue successfully, dissolution may be the best option.
If a business has members or shareholders, a court may order the dissolution of a company to protect the assets of these people. This can happen if a company has engaged in illegal or fraudulent activities or if they have spent company assets unwisely. A deadlock among directors regarding a major decision could also cause involuntary dissolution.
The state can also revoke, inactivate, or dissolve a business. Here are some examples of reasons a state would involuntarily dissolve a business:
A company’s creditors could also request dissolution if they feel it’s necessary to recover the money they’re owed.
Dissolving a business requires more than just ceasing operations and locking the door. All remaining assets and liabilities have to be managed appropriately to avoid legal repercussions. Here are the steps required to properly dissolve a business.
The first step toward official dissolution is to create a resolution to dissolve. This should be agreed upon by the owners, the board of directors, or the partners depending on the type of legal entity. Once the resolution is complete, the business will file Articles of Dissolution with the state. In most cases, this paperwork goes to the Secretary of State. Savvy business owners will be wise to check if other forms are required in their state.
A company needs to sell its remaining assets as part of winding up. That said, whether it’s possible to liquidate all of those company assets will depend on how much cash the company has on hand at the time of dissolution. Whether the company has enough assets to cover its debts will also affect liquidation.
A business’s tax obligations don’t automatically end when the business ceases operations. The business needs to formalize the business dissolution with its state and local governments, as well as the IRS; failing to complete this step could lead to additional tax liabilities. This includes finishing up any payroll obligations.
A company can’t continue to do business after the dissolution is approved. Exceptions include what’s necessary to close everything up. This may include:
Dissolving something means making it disappear, separating it into its component parts, or ending something. Dissolving a business means officially closing it. There are several steps necessary for dissolving an LLC or other business entity.
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Dissolving a business may not be the most exciting part of being a business owner, but it might be the best move. By remaining compliant with state requirements for business documentation and accurately tracking business finances using ZenBusiness tools and services, the process can go much more smoothly. And when an entrepreneur is ready to start again, ZenBusiness is ready to help with their business formation services.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
Written by ZenBusiness Editorial Team
The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions.
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