Unfortunately, business owners sometimes must make the decision to leave their enterprise behind and move forward professionally and personally. Perhaps you’re facing bankruptcy, ready to retire, or are planning your next big career move. Whatever your motivation may be, the process of closing your business should be completed thoroughly and officially.
Dissolving your business properly and legally is the only way to ensure you and your partners are no longer financially or personally liable for any aspect of your company. Determining, preparing, and filing the necessary documents can be overwhelming. For this reason, it is usually recommended that you work closely with business dissolution professionals to complete the process.
Although your exact requirements will be determined by your location, these are the steps you can expect to take when it comes time to close your company.
Draft and vote on a Termination Proposal.
For a Corporation:
A certain number or majority of shareholders must agree on both the dissolution of your business entity and the terms under which it takes place. An official outline should be drawn up and approved by the board of directors, then voted on by your shareholders at a company meeting. Be sure to document this meeting and keep it for your records.
For an LLC:
Dissolving an LLC is similar to corporation procedures, just a little less structured. All members/partners of an LLC must approve the close of the business and its terms. Then, a Member Resolution can be issued and signed by the required number of members. A documented meeting is not necessary, but still recommended.
File required state and federal forms.
For the State:
Each state requires a Certificate of Dissolution—sometimes called Articles of Dissolution—to be filed to officially close your entity. Before doing so you may need to receive a Tax Clearance form from the IRS.
Be sure to give yourself and your tax experts enough time to complete and submit these forms, along with your final tax return. Don’t wait until the last few months of the year to officially dissolve your business. If you wait too long and end up dragging the process into the following year, you might have to pay additional state fees and possibly even submit a tax return for the new year!
For the Federal Government:
You will need to zero out and close all accounts associated with the business you are dissolving. From that point, you have 2.3 months to complete a final year-end tax return.
If the time has come for you to dissolve your business entity, the professionals at Traders Accounting can help you with a formal termination. We’ll prepare and file the required documents with your Secretary of State for all jurisdictions of your company. Contact us today for more information or visit us online to register for our convenient webinar!