What is required to dissolve a company?

Getting out of business can be just as complicated as getting started. You cannot just walk away. You must organize an orderly cessation of activities. Here’s how to close a business properly.

Make Sure Everyone Wants to Dissolve the Company

Hold a meeting to discuss the dissolution of business. You may want out of your business, but your partners or shareholders may feel otherwise. Establish the direction for the end of business before beginning the process.

In many instances, the agreements you created when you formed your company describe the steps necessary to dissolve the company. A partnership may require you to offer the other owners a chance to purchase your portion of the business. For corporation and LLCs, shareholders vote on a resolution.

File Your Documents of Dissolution with Your State Government

These forms declare your intention to bring your company to an end. Each state has different rules concerning the timing of these declarations. Some require you to file before you notify creditors, and others expect you to file afterward.  

Settle All Debts

Your financial obligations still exist. Before you dissolve a business, you must notify all interested parties of your intentions:

  •    IRS – Pay your final income taxes from profits in your last days in operation
  •    Creditors – Satisfy or arrange to settle all debts your business owes
  •    Vendors – Cancel orders, contracts, and services early to avoid incurring additional expenses
  •    Employees – Budget to cover payroll expenses through the end of the company’s life

When you are confident your final expenses have been taken care of, close your business accounts and distribute the remaining funds to former owners.

Record Keeping and Important Documents

Even if the business no longer exists as an entity, you may still need to answer questions if the IRS audits your company. Keep your documents organized and arrange to store your files in a secure location.

If you plan your business well in the first place, ending the company should be a smooth process. Get help from GovDocFiling when setting up a business partnership or applying for tax ID number.

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