Small Business Bankruptcies Are Up 67% in 2026. When Is It Time to Dissolve?

Small business bankruptcy filings were up 67% in the first quarter of 2026 compared to the same quarter a year earlier. Part of the pressure is a new wave of tariffs that took effect this month, covering close to 99% of U.S. imports across roughly 60 trading partners. If your LLC has been bleeding money since the new tariffs landed, the question is not whether to act, it is whether dissolution or bankruptcy is the right move, and dissolution is usually both.

Here is what changed, what the numbers actually mean for a struggling LLC, and how to tell which path fits your situation.

What Happened With Tariffs in July 2026?

A new, broader round of tariffs took effect this month, applied under Section 301 of the Trade Act of 1974 and covering close to 99% of U.S. imports from about 60 trading partners. A group of small businesses filed suit against the administration within a day of the tariffs taking effect, arguing the added cost is forcing import-reliant companies out of business. This builds on tariff pressure that was already squeezing import-dependent small businesses through 2025.

Why Are Small Business Bankruptcies Up 67%?

Bankruptcy filings for small businesses rose 67% in Q1 2026 versus Q1 2025. Survey data shows 45% of small business owners took on new debt to cope with tariff costs, and 40% tapped personal savings just to keep operating. Most businesses responded to the added cost by raising prices, which works until customers stop buying. For a lot of owners, that is the point where the math stops working at all.

Bankruptcy filings for small businesses were up 67% in the first quarter of 2026 compared to the same quarter the year before.

Is Your LLC One of These, or Still Fixable?

Not every struggling LLC belongs in this statistic. Ask three questions:

• Is the loss temporary or structural? A bad quarter is different from a business model that no longer works at the new cost basis.
• Do you have a realistic plan to absorb or pass on the added cost? If customers are already pushing back on price increases, that plan has probably run out.
• Are you funding the business with debt or personal savings just to keep the lights on? That is the exact pattern behind the 45% and 40% figures above, and it rarely reverses on its own.

If the honest answer is that the LLC cannot recover at the new cost structure, the decision left is not whether to close, it is how.

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Dissolution or Bankruptcy: Which One Fits?

Most LLCs hit by tariff pressure should dissolve, not file bankruptcy. Dissolution is the right call when the LLC can pay or negotiate what it owes from its own remaining assets. Bankruptcy is a federal court process reserved for debt the business can never realistically pay back, and it is slower and far more expensive. We cover the full comparison, including who is personally liable for what, in our dissolution vs bankruptcy guide.

The mistake owners make under tariff pressure is waiting. Every extra month an unprofitable LLC stays open adds registered agent fees, annual report costs, and in some states a franchise tax, on top of the operating losses. Closing now, while dissolution is still the available option, is almost always cheaper than closing later once bankruptcy becomes the only one.

What Does It Cost to Dissolve an LLC Right Now?

Dissolution starts at $99 plus your state's filing fee, which ranges from about $25 to a few hundred dollars depending on the state. See the full breakdown in our state-by-state cost guide. That is a fraction of even a simple bankruptcy filing, and it stops the ongoing fees immediately instead of a court process stretching over months.

What If Things Turn Around Later?

Tariff policy and interest rates both move. Interest rates have actually declined this year, which is part of why new business formation remains high even with tariff pressure elsewhere. If your situation improves, forming a new LLC later is fast and inexpensive, usually cheaper than a year of fees on a company that was not making money in the meantime. Dissolving now does not close the door on starting again when the numbers work.

Not sure which side of the line your LLC is on? Start on our dissolution page and we will help you weigh dissolution against bankruptcy based on your actual numbers.