How to Close a Business by the Ending Date
Ten percent of all businesses in the U.S. closed in 2009. Businesses close for a variety of reasons including resale, reorganization and bankruptcy. According to the U.S. Small Business Administration, three out of 10 businesses fail in the first two years, making business closure a common practice. However, to close a business by the ending date takes planning because businesses must comply with certain legal procedures.
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Things You'll Need
- State dissolution forms if the business is an LLC or corporation
- Funds to cover taxes due and outstanding debt
- A legal representative to close financial accounts
- A storage place for all business documents and files
Instructions
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Review the government's business closing regulations and labor laws and establish the businesses closing date. Before setting a closure date, contact state and federal authorities concerning closure notifications. The Worker Adjustment and Retraining Notification Act (WARN) protects workers in businesses with 100 or more employees by requiring businesses to provide a 60-day advanced written notice before closing. The U.S. Department of Labor offers a free service called Rapid Response Services for Employers to assist businesses with employee layoffs and closures. Contact your state's Department of Labor for any state regulations pertaining to employee and business closure notification.
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Review the legal requirements needed to close a business. If the business is a limited liability company (LLC) or a corporation, it must notify the state through the Secretary of State's Office. The required LLC or corporate dissolution forms are often available on-line through the Secretary of State's website. Expect to pay a filing fee and to file certain documents such as partner proxy voting to close the business. Sole proprietors and partnerships often do not have to register an intent of closure with the state; however, check with the Secretary of State's Office to confirm current state regulations.
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Cancel all business registrations, permits, licenses and business-name filings. This prevents unauthorized individuals from using your business licenses and permits and protects personal finances and assets. Contact the original permit and license issuing agencies for the appropriate cancellation forms. To cancel the uses of assumed or registered business names, contact the Secretary of State's Office for the cancellation forms.
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Resolve tax obligations and business debt obligations. The U.S. Internal Revenue Service (IRS) and all states require businesses to pay all taxes including sales tax, withholding taxes and real estate taxes. Sell off or return existing inventories to pay off debt obligations. Business and employee withholding should include all taxes up to the business' end date. Businesses must legally pay all debt obligations prior to closing unless the company is filing for bankruptcy. If the company has filed bankruptcy, consult with your bankruptcy attorney on how to proceed in resolving tax and debt obligations.
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Close bank, vendor and other financial accounts. As a security precaution make sure all vendors know of your business closing and close all business financial accounts as of your business' close date.
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Find a secure location to store business records. Closing a business is a process that produces a number of business closing documents such as LLC or corporate dissolution forms. The IRS and most states require business owners or a designated representative to keep all business records such as tax receipts, accounting books and employment records for a period of three to seven years.
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References
- Connecticut Department of Revenue Services: Closing or Ending a Business in Connecticut
- University of California: Close Process and Lockouts
- U.S. Internal Revenue Service: Closing a Business Checklist
- State of Tennessee Department of Revenue: Closing Your Business
- Business.gov: Steps for closing a business
- U.S. Small Business Administration: Frequently Asked Questions about Small Business
Resources
- Photo Credit Dan Kitwood/Getty Images News/Getty Images
