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For one reason or another, it might be time to shut the doors on your business. For example, let’s say you formed an LLC for a catering business years ago. But over the past year, you’ve moved on to a new venture. You haven’t had any catering clients in 2013, aren’t actively promoting that business, and you even turn away anyone who’s interested.
You’ve got no revenue or customers, so you’ve pretty much closed the business, right? Not exactly.
Without a formal termination of the LLC or Corporation, you can still be charged fees associated with the business. You’ll still be expected to file an annual report (where applicable). You’ll still be required to submit tax returns to the IRS and state. In addition, you won’t be allowed to distribute any Corporate/LLC assets to shareholders until the company has been properly dissolved.
Formally closing your business isn’t complicated. If you’ve already stopped doing business, it’s wise to wrap things up before the start of the New Year. By dissolving your business within 2013, you’ll be free from any obligations in 2014 and have a clean slate to focus on whatever’s next. Follow these steps to formally close your business:
# 1. Dissolve your Corporation or LLC
If you’ve been operating your business as a Corporation or LLC, you’ll need to officially and formally dissolve it by filing an “Articles of Dissolution” or “Certificate of Termination” document with the Secretary of State where your Corporation or LLC was formed. While this is a pretty easy task, you should work with a legal document filing service or your attorney, since laws regarding corporate dissolution vary by state. These professionals can advise you on your state’s particular requirements and make sure your company is closed properly, and legally.
If you’ve been doing business as a Corporation, LLC, or Partnership, all business associates must vote to close the business. You’ll need to record the final vote in the minutes of a meeting or with a written consent form. If shares have been issued in a Corporation, two thirds of all voting shares must agree to dissolve the company (specific requirements vary by state). If no shares have been issued, then the Board of Directors must approve the dissolution.
# 2. Make sure your company is in good business standing (i.e. pay any back taxes)
In most cases, your company will be required to pay any back taxes before you’ll be allowed to dissolve it. For example, you may need to receive a “tax clearance” (or “consent to dissolution”) from your state tax board showing that all of your business taxes have been paid and you are in good standing.
# 3. Cancel permits, licenses, or fictitious business names (DBAs)
You should also cancel any kind of permit or licenses you hold with your state or county. There’s no reason to hold on to them, and you don’t want to be liable if someone else accidentally or intentionally uses your seller’s permit or other license. And if you’ve been using a fictitious business name, you’ll need to file an abandonment form.
Throughout the whole process, remember to take closing your business just as seriously as you did opening it. Your credit and reputation are at stake. By waiting until the last minute, you might find yourself in the unfortunate position of paying extra taxes, penalties, and other fees. There’s simply no reason to pay an extra cent in fees toward a business you know you’re retiring. Put that money towards your next venture instead!
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