Make sure to comply with all state laws to close down your type of business.
The steps for closing down a business depends upon how the business is legally organized. Independent business entities, such as corporations and limited liability companies, have formal requirements for ceasing operations that are based on state law. Sole proprietorships and general partnerships are easier to close down because they are less regulated as simply extensions of their owners. However, the basic theory of ceasing operations, paying off all creditors, canceling state and federal registrations and filing final tax returns remains the same regardless of the business entity type.
Instructions
1. Vote to close down the business and record the vote in writing as a resolution. Partnerships, limited liability companies and corporations must have the majority consent of the owners to close down the business. In some states, the Limited Liability Company Act requires a two-thirds majority to close down a LLC, and in other states, the written consent of all owners is required. Check the business code of the state where your business is registered for the exact requirements for your business.
2. Pay all outstanding creditors. Use business assets to satisfy all obligations, including loans made by owners to the company. Put money aside if you suspect a financial obligation to arise after the business has closed down.
3. Distribute the remaining assets to owners in proportion to their ownership interest. If there are assets remaining after satisfying all debts, the remainder should be distributed first to reimburse owners for their capital accounts. Then, any remaining to owners in proportion to their ownership interest.
4. File dissolution paperwork with the state or cancel state licenses or DBA registrations. Corporations and LLCs must file articles of dissolution with the state office where their formation paperwork was filed, usually the secretary of state's office. Dissolution articles state that the business is dissolving as of a particular date. Many states provide a template that can be downloaded from the state website. A few states require sole proprietorships and general partnerships to obtain a business license. Cancel the business license and any DBA, or "doing business as" name, that has been registered with the state, if applicable.
5. Cancel accounts, business registrations, permits and licenses. Terminate insurance, close bank accounts and cancel business registrations and accounts with all state agencies, including the revenue and employment departments and any state agency that issued a specialty or occupational license or permit.
6. Provide notice of dissolution to the public, if required. State business codes typically provide an avenue for independent business entities, such as corporations and limited liability companies, to avoid having its owners be perpetually liable for lawsuits initiated after a business has dissolved. Many states require companies to publish an announcement of the business closing in a paper of general circulation with a deadline for filing claims. Any claim that is not filed by the deadline is forever barred.
7. File final federal and state tax returns for independent business entities that file business tax returns. Check the "final return" checkbox in the header of the state and federal tax return forms to notify the tax entity that this will be the last filed return for the business.
8. Close the business employer identification number, or EIN, account of a sole proprietorship with the IRS. A sole proprietorship does not file a separate business tax return so can't notify the IRS of dissolution by checking a final return checkbox. If the business had its own EIN that it used to open a bank account, for instance, it must notify the IRS that the EIN account should be closed. Write to the IRS at Internal Revenue Service, Cincinnati, Ohio 45999, requesting they close the account, and state the reason for the request.
