The decision to end a business can take place for a number of reasons. Whatever has brought the business owner to the decision to close their business, it is important that they understand how to properly dissolve the business.
Individuals whose business is a sole proprietorship can decide unilaterally to close their business. Individuals involved in a different type of business entity, such as a partnership, limited liability company or corporation, must consult the co-owners of the business before closing. The co-owners must decide to dissolve the business according to the process outlined in the articles of organization. It is important to document the final decision to close the business in writing.
Secondly, because there are a number of steps involved in the process of dissolving a business, it can be important to enlist the help of experts in different, and relevant, professional areas. It is important that the steps to dissolving a business are properly followed because, for instance, the failure to properly file dissolution documents can result in continued tax and filing liability for the business. It is also important to cancel any registrations, permits, licenses and business names the business may have. It can be important for financial and reputation reasons that legal designations not continue to remain active and remain un-cancelled after the business has been dissolved.
Employment and labor laws in each state must also be properly complied with which can include time frames for issuing final paychecks and paying employees for any unused leave time. It is necessary that the business and its owners are familiar with any relevant worker protection laws that may require advance written notice to employees of the business closure. A business that is in the process of dissolving may have sales or payroll tax liability remaining and is required to file final tax returns. It can be useful to consult IRS requirements for dissolving the business. In addition, business debts will have to be settled and financial accounts should all be closed.
Throughout the process of dissolving a business, it is important to keep thorough records. There are a number of important steps involved in dissolving a business that should be closely followed which is why it is essential for business owners to have an adequate knowledge of them and are familiar with how to close a business.
Source: U.S. Small Business Administration, “Steps to Closing a Business,” Accessed April 26, 2015