Loss of revenue, interest in another career or frustrations with the market are all reasons why you may wish to close your business. However, having a "going out of business" sale, closing your business bank account and moving across the country won't officially close your business—particularly if you have a federal tax ID number. You must also contact the Internal Revenue Service (IRS) and submit a number of forms before closing for good.
The Internal Revenue Service requires business owners to file a tax return for the year they go out of business. Also, according to IRS.gov, "if you have employees, you must file the final employment tax returns." Among the tax forms you'll need to submit to the IRS are forms 940 for annual returns and 941 for quarterly returns. If you have an agricultural business, you'll need to file forms 943 and 943-A. Each of these forms require that you state your tax liability.
Capital Gains and Losses Form
The IRS requires that business owners report their capital gains and losses for the year they go out of business. Capital gains and losses refers to the income derived or lost from investments such as stocks and bonds. Form 1040, a form used by many individuals to file taxes, should be filed if you have outside investors and need to pay a capital gains tax. Additionally, Form 1120 should be filed to list short-term and long-term capital gains on property sold or acquired for your business. Figures on this form should be added to the capital gains section of Form 1040.
Corporate Dissolution Form
If your business is a corporation, you'll need to file a corporate dissolution form. Before filing paperwork all creditors and shareholders must be paid. When filing the form, you'll need the following information: date and place of incorporation, as well as the service center where the corporation was filed. Form 966 must be filed 30 days after all plans to dissolve the business have been accepted.