How do I dissolve a Utah LLC or close a sole proprietorship?: 7 Mistakes to Avoid

Whether you’re running a tech startup in Lehi or a family bakery in Ogden, there comes a time when you might need to close your business. In Utah, dissolving an LLC or wrapping up a sole proprietorship isn’t as simple as packing up—there are important legal steps and potential pitfalls to avoid. Properly closing a business prevents future tax bills, legal headaches, and confusion if you want to start fresh later. This guide explores common mistakes Utahns make, offers step-by-step advice, and highlights the state laws you need to know.

LLCs and sole proprietorships are the most popular small business structures in Utah. Closing each type requires a different approach:

• Utah LLC: Must be formally dissolved with the state by filing specific paperwork and settling debts (Utah Code § 48-3a-701).
• Sole Proprietorship: Usually ends when the owner stops doing business—no formal state process, but local permits, sales tax accounts, and business names need to be canceled.

Not following the right process can leave you on the hook for unwanted taxes or fees, so let’s dive into the most common mistakes to avoid.

1. Forgetting Legal Paperwork: Utah LLCs must file a Certificate of Dissolution with the Utah Division of Corporations. Sole proprietors should officially cancel any local business licenses and state tax accounts.
2. Ignoring Debts and Contracts: Not paying off business loans or resolving leases can lead to lawsuits. Utah courts may come after your personal assets if you skip this step.
3. Missing Tax Responsibilities: You must file a final Utah tax return and pay any sales taxes owed. For LLCs, the Utah State Tax Commission needs to know you’re closing (Utah Code § 59-1-541).

Let’s say Maria, who owns a small LLC hair salon in Provo, decides to retire. If she simply stops booking clients and walks away, she could face late taxes or miss closing out product supplier contracts. By filing her dissolution documents, canceling her business name registration, and notifying Utah’s Department of Commerce and State Tax Commission, Maria avoids penalties and closes her doors with peace of mind.

• Double-check all business accounts and licenses—don’t forget your Utah state and local registrations.
• Keep copies of all closure paperwork and final tax returns for your records.
• If you had employees, follow Utah Department of Workforce Services rules for final paychecks and unemployment taxes.

LLCs must file a Certificate of Dissolution with the Division of Corporations and, if registered for sales tax, submit a final TC-69 form with the Utah State Tax Commission. Sole proprietors often forget to cancel their DBA (doing business as) trade names and local permits—an easy way to get unwanted mail or surprise bills down the road.

After your dissolution is submitted, the Division of Corporations generally processes paperwork in 1–2 weeks. However, you’re not legally done until all debts and taxes are settled. Sole proprietors should make sure all final tax filings, city obligations, and business accounts are closed—otherwise, you could still be liable months later.

• File a final Utah tax return and pay outstanding state/local taxes.
• Submit required dissolution paperwork (if LLC) or cancel licenses (if sole proprietor).
• Resolve contracts, pay employees, and keep proof of every closure step.
• Update business partners, customers, and suppliers about your closure.

By following these steps, Utahns can avoid the most common closure mistakes—saving time, protecting your reputation, and keeping the door open for future opportunities.