Deciding to close your business can be difficult, whether you are a sole proprietor or part of a partnership, limited liability company (LLC) or corporation. Additionally, the business dissolution process can be more complex than you might think.
First, you have to make the decision to dissolve the organization, with all parties in agreement. The final decision must be documented in writing. Then you must close your business according to the guidelines established in your articles of organization.
The following steps for closing a business can help you to manage the dissolution of your company:
- Get advice from the experts - As mentioned previously, closing a business is a complex process. You may want to enlist the advice and guidance of a business lawyer as well as accountants, tax experts and financial advisers.
- File business dissolution documents - Documents must be filed to end your tax liability, as well as to inform the government and creditors of the change in entity status.
- Cancel all registrations, permits and licenses - Cancel any of these items that you no longer need to safeguard your finances and reputation. This includes business name registration with your local government.
- Comply with employment and labor laws - Distribute final paychecks to employees in a timely manner, typically by their last day of work. If possible, you also might want to give them a 60-day notice of the business closing.
- Resolve financial obligations - Inform the IRS and state tax agencies that your business is closing and close your employee identification number (EIN) account. Ensure you've met all business tax obligations. Settle all business debts and close business bank accounts and credit cards.
- Keep accurate records - Maintain tax, employment and business records after your business has closed. A reasonable timeline for this is three to five years.