Just because you’ve stopped working with customers, taken down your website, and aren’t making money from your business, it doesn’t mean your company is considered “closed.”
Closing a business, whether an LLC or corporation, requires formally dissolving it with your state. If you don’t, you could be stuck with the responsibilities of filing your inactive business’s annual reports and state/federal tax returns. And you may be legally obligated to renew your business licenses and permits, too. All of that costs time and money. So if you’ve stopped doing business and are sure you want to retire your company, the sooner you legally dissolve it the better.
With the end of 2016 around the corner, now is a wonderful time to take action and close your business if it’s inactive. Wouldn’t it be nice to set yourself free from any tax and filing obligations related to that inactive business in the New Year?
But, what’s the right way to go about closing your company?
Here’s a checklist of what you need to do:
- Formally Dissolve The LLC Or Corporation.
You’ll need to formally dissolve the legal entity with your state.
- With a corporation, all business associates need to vote on closing the business. If your corporation hasn’t issued shares, you need the approval of your Board of Directors to dissolve your business. If your corporation issued shares, two-thirds of the voting shares need to agree to dissolve the company.
- With LLCs, dissolution rules vary from one state to the next. Make sure you review the requirements in your state’s Limited Liability Company Act.
- Depending on the state where your LLC or corporation is registered, you’ll either need to file an “Articles of Dissolution” or “Certificate of Termination” with the Secretary of State’s office.
- Pay Your Debts.
To properly close your business, you must settle all your company’s financial obligations. Typically, LLCs and corporations need to pay their debts before they can legally distribute money or assets to their members. If your business falls short with its resources to pay its debts, seek an attorney’s help to determine your options.
- Contact Your County To Cancel Your Business Licenses And Permits.
Don’t forget to cancel your business license, seller’s permit, and any other types of licenses and permits your business filed for to operate legally. If you neglect to cancel them, the county will think your business is still in operation and they may continue to charge you fees and taxes.
- File Final Tax Returns And Close Your Business’s Federal And State Tax Accounts
In addition to your state, the IRS will also need to know you’re closing your business. File your final state and federal tax returns. On your tax return, you can indicate it’s your final return by checking the box that specifically identifies it as such. Also, cancel your Employer Identification Number (EIN). If you have/had employees, make sure your business’s payroll withholding taxes are current. If you don’t, you or other owners/members might find yourselves personally liable for paying any outstanding payroll taxes.
Wrapping It Up
Besides the four steps I’ve mentioned above, also inform your customers, contractors, and vendors that you’re officially closing your business. Even if you haven’t actively worked with them for a while, it will show consideration and respect if you proactively communicate the dissolution of your company.
While your current business may be closing, don’t underestimate the power of maintaining and nurturing the professional relationships you’ve built along the way. As you move on to a new career or start a new business, keeping the lines of communication open may open the door to new and exciting opportunities, as well.
Do you need help filing your dissolution or have a question regarding the process? Call the CorpNet.com team today for a free business consultation at: 888.449.2638