How do I end a business?
Ending a business or “business dissolution” is not as simple as placing a “closed” sign on a business and walking away. One must file the appropriate paperwork with government and tax authorities to legally end your business and prevent further taxations from the government. One must also settle all business debts before walking away from a business for good.
What are Articles of Dissolution?
Just as you had to file paperwork to start a business, incorporate an LLC or apply for tax emptions, you must file Articles of Dissolution. The Articles of Dissolution is a notice to the state or relevant authority, be it city or county to stop taxing your business, as it no longer exists. The business operations must either be shut down or sold and all debts to creditors and employees must be paid. The tax authorities will have no way of knowing this and will keep assessing tax unless you go through the business dissolution procedures. The Articles of Dissolution must be filed with your state’s Secretary of State and you may be charged a nominal fee.
Who must know about the business dissolution?
In addition to the government requirements for articles of dissolution, creditors must be informed of the business dissolution, so that they may make arrangements to be repaid, either through the liquidation of remaining assets of other means. Only after the creditors have been satisfied may the remaining assets from the business dissolution are distributed to those that owned the business. Employees are also due their wages before dissolution as well.
What must I do to file for business dissolution with the IRS?
The IRS has its own set of forms that must be completed to allow business dissolution:
Form 966 is the “Corporate Dissolution or Liquidation” from which must be filed. This short form will identify the company being dissolved. This form will require a copy of the resolution that states the shareholders have agreed to dissolve the company. This will stop federal taxes against the company that you wish to terminate.
In addition to filing Form 966, you must file other income and employment tax returns, as typical until the end of the tax year. The final tax return will be marked with “final” to inform the IRS that this is the last tax return they will receive on behalf of your company.
Do I need a lawyer for business resolution?
A business lawyer can help simplify the business dissolution process, especially for large enterprises with many employees and several creditors. The business lawyer may charge a flat fee to prepare the documents necessary for business dissolution and may also charge hourly fees for meeting with him or her to discuss you dissolution options. The business dissolution lawyer will be able to work with all state, local and federal authorities to ensure they are aware of the dissolution and can even work with creditors to ensure they are paid and satisfied with the claims against the business. The business lawyer will also be aware of additional forms that may be necessary to dissolve certain legal entities, such as LLCs and LLPs.