It’s time. You’re happy, but at the same time you’re sad. Your business is ready to be shut down. Maybe you’re hanging your hat up for good. Maybe you’ve decided to move on to something else.
Whatever the case may be, there are specific steps you need to take before you can close the doors for good.
Vote On It
The first thing you need to do is vote on the closure of your business. Even if you’re a one man show, the state continues to recognize the business as an ongoing legal entity until the corporation is formally dissolved. You’ll be liable for filing an annual report and paying fees and taxes until that business has been formally dissolved.
When you vote, make sure you record it and keep this with the records of the business.
The process for most corporate structures is the same. You will need to call a meeting of the board of directors and vote on a formal closing of the company. In most instances, this requires a formal majority or two-thirds, vote to dissolve.
Depending on your structure, however, you may be required to have a unanimous vote.
If you are closing an LLC, you’ll need a formal vote by all members.
For partnerships, you will usually need to have one partner send a formal written notice to the other, notifying them that they are leaving. This should be accompanied by a statement of dissolution or procedures for winding down the company.
If the company doesn’t have a dissolution plan, you must follow the procedures in your state’s statutes.
Pay Off Your Debts
One of the things that often gets overlooked is the creditors. Creditors need to be paid off in order for the business to truly be dissolved. If you’re in a foreign country, or if part of your business is located there, you may need to have a multi-pronged approach to closing down shop.
For example, you may need to hire a bankruptcy lawyer from IRB Law in Singapore for one business and another law firm for the U.S.
You must generally send creditors a notice that the business is closing and then you must submit a deadline for which your debts will be repaid. Usually, creditors will have between 90 and 180 days after the date of the notice to submit a claim.
You may also want to publish a notice of dissolution in the local newspaper. This will reduce the risk that an unknown creditor will try to file a claim against your business after the company has been formally closed.
In most states, unknown creditors have just 2 years to file a claim.
Don’t Forget Taxes
The IRS is one of the biggest creditors for businesses, and you can’t forget to pay them. The Internal Revenue Service must be notified immediately. If you have employees, you must make your final payroll tax payments and file a final federal and state employment tax return.
You and your co-owners may be held personally liable for any unpaid payroll taxes.
If all of your outstanding taxes are paid up to date, have the IRS issue a “consent to dissolution” or a “tax clearance” document. This is required in most states before you can file articles of dissolution with the state.
If you also had a DBA, you will need to cancel that registration as well.
Your Final Tax Return
The final tax return for your business should be marked “final return.” You will need to notify the IRS to close your employer identification number account as well.
The Final Paperwork
You’re almost done. You need to cancel all of your business licenses and permits, and don’t forget to contact your insurance broker to cancel your liability insurance and worker’s compensation. This should be your last business-related phone call. Also, cancel your employee benefits and health insurance coverage. Make arrangements for someone to store all business records. You’ll need them for at least 3 years, but perhaps up to 7 years. Consult your tax attorney or CPA.
If you’re having trouble keeping everything straight, make a checklist. A checklist can help you get through everything you need to get through rather quickly. It can help you organize your thoughts, ensure you don’t forget everything, and – most importantly – it can help you keep your sanity.
Most of the stress of closing a business lies in all of the paperwork and the formalities that need to be done. This is especially true when it comes to taxes.
Hiring professionals to help you is probably a good idea too, because those professionals can pick up the slack and file paperwork with you or for you. Even if they only assist you and don’t do the work for you, it can take a lot of your shoulders so that you can unwind the business without forgetting anything important.