Dissolving Your Business? 6 Steps That’ll Help
Closing a business is often a difficult and complicated choice to make. Usually, the decision to close has little to do with the financial performance and more to do with a change in ownership or the death or injury of a key owner. Regardless of the reason, it’s helpful to follow a systematic dissolution strategy whenever possible. Here are some steps to include as you prepare your plan:
- Get expert advice. Dissolving a business can be a stressful and fragile process. The best place to start is by creating a buy-sell agreement long before you get to the end. By agreeing beforehand, many future problems can be avoided. If your business does not have a written agreement, get help from competent professionals (including attorneys, bankers, and others) to iron out the details.
- Vote to dissolve the business. A sole proprietor may only need to consult with a spouse or trusted advisor. With a partnership, corporation or limited liability company, more than one business associate must agree to the dissolution. Organizational documents or a state’s business statutes often mandate the level of agreement required (a simple majority or two-thirds majority, for example), so you’ll want to consult applicable rules.
- Fill out dissolution paperwork. Let your state and local governments know that the company is ceasing operations. The forms you need should be posted on your secretary of state’s website. Especially when a partnership or corporation is dissolved, formal filings should prevent future confusion about ownership and liabilities.
- Cancel licenses, permits, and insurance policies. Most businesses are required to obtain city, county and/or state licenses to operate. The appropriate agencies must be notified of the dissolution. Insurance brokers should also be told to cancel business liability, health care and other company policies.
- File a final tax return. Even if the business only operates for a portion of the year, you’ll need to notify the IRS that the company’s annual tax return is its last one.
- Notify interested parties. You’ll need to inform lenders, suppliers, service providers and customers. Lenders will be eager to find out how you plan to repay loans. Suppliers will want to know when to make final deliveries. Utility companies will need to know when to turn out the lights and shut off the water. Customers should also be given plenty of notice about final orders and ongoing projects.
These important steps will help effectively move along your shutdown process. If you have questions about preparing your business, contact us today.
As always, should you have any questions or concerns regarding your tax situation please feel free to contact us.
As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.