Some small businesses shut their doors forever for a number of reasons. Even though closing a company may be a difficult choice, if the proper procedures aren’t followed.
Stopping marketing campaigns and selling goods and services is only one aspect of leaving a company. You must also take care of additional formalities to formally dissolve your company and file paperwork with the authorities. Failure to handle those details could result in expenses (and possibly fines) owing even after a business has stopped providing its clients with their requested goods or services. So what can one do to close their business? This article covers a number of steps to be followed during such situations.
Seven Steps to Closing a Business
Dissolve Your Business Entity
Companies and LLCs must formally dissolve themselves to inform the state that they are no longer in existence. Articles of Dissolution must be sent to the Secretary of State’s office in this situation. Before proceeding further to close a company, multiple-owner businesses must first call a board of directors or business partners meeting for a unanimous vote. Because the procedures for each state and municipality where your company is registered may differ as a commercial arbitration Lawyer, it is imperative to research the regulations in each place.
Selling your assets and obtaining the money you are owed
A collection strategy must be in place if you have delinquent accounts receivable. Once you close your business, collecting accounts receivable could be much more challenging. The eagerness of other businesspeople to pay may be lower. Additionally, because of their accounting practices, they could be unable to repay a person rather than a business entity. But obtaining unpaid accounts can help you have cash on hand, which can be helpful when you get ready to close.
Pay Your Outstanding Debts
Closing your accounts payable requires paying any outstanding supplier and service provider invoices. Speak with a lawyer about your alternatives if you cannot make your payments.
State sales tax must be paid and final payroll taxes filed
If you have employees, you must submit your payroll forms as usual and pay your final payroll taxes after giving them their final wages and salaries. What would happen if you could not pay your payroll taxes to the IRS? You might be able to lower the amount you owe by submitting an “Offer in Compromise” to the IRS. Accepting paying your tax bill in installments is an additional choice to consider.
Send your final state sales tax forms along with the tax you have collected from your consumers. Then, find out what steps need to be taken to close your tax account by contacting your state and local tax authorities.
File Your Last Income Tax Return
Corporations and LLCs must check the “final return” box on their income tax forms. Corporations must include shareholder allocation information on Schedule K-1 (and losses).
Revocation of business licenses and permits
If any business licenses or permissions are needed by the federal, state, county, or municipal governments, inform them that your business has closed. You can avoid doing this even after you stop operating as a business, saving you money on renewal fees and tax obligations.
Share assets with partners or stockholders
Businesses with multiple owners should distribute any funds or assets that remain after all liabilities have been paid to partners or shareholders. The division of assets in LLCs will depend on the percentage of ownership that each partner holds in the business. Depending on how many shares each shareholder has, firms will divide assets among them.
As you can see, many duties are involved with shutting a firm. Many firms advice that you reach out to Commercial Litigation lawyer in New Jersey and accounting experts who can offer help on the procedure to make sure you cover all the bases. Additionally, you might discover that online services for filing business documents will make canceling licenses and permits and submitting paperwork for dissolution easier.