Businesses close for any number of reasons. Unfortunately, some have been unable to make it through conditions brought about by the pandemic. Others close because the business owner is ready to move on to a new endeavor, be it retirement or another market. And others close because the business idea did not pan out as planned. Whatever led to the dissolution of the partnership, LLC, or corporation, business owners must follow proper protocol when closing their business.
Although the exact process will vary with each business, four general steps that apply to most business dissolutions include:
- Follow the business articles. Businesses with a written partnership agreement or business articles must follow the procedure included within these documents to close their business.
- Notify the state. Business like limited and general partnerships often file with the state when their business begins. These businesses must also notify the state when the business ends. The state generally requires business owners file dissolution papers to report the closing.
- Notify creditors. Depending on the business structure, businesses may need to inform creditors the business has dissolved and provide a mailing address for the creditor to send any claims. This is generally true of businesses incorporated as LLCs and corporations.
- Remember tax obligations. The IRS requires business owners file a tax return for the business for the tax year the business closed. For those with employees, this should include employment tax returns and federal tax deposits of taxes due. Businesses that owned property will have additional obligations. The IRS may require the business owner file a Form 4797, Sales of Business Property.
Business owners are wise to act to protect their interests. An attorney experienced in business dissolution matters can offer representation to better ensure your interests are protected.