Someone once told me that a true sign of a successful entrepreneur is the ability to know when it’s time to throw in the towel and move on. One failed business doesn’t define an entrepreneur. Plus, when one door closes, another usually opens.
Closing a business doesn’t just mean selling your assets and calling it a day. You’ve got to go through the requisite steps to ensure your business is legally closed and that you’ve properly wound up your business affairs. Otherwise, you could be personally responsible for filing annual reports, filing state/federal tax returns, and maintaining miscellaneous business licenses and filings.
Five Steps to Close an Inactive Business
1. Dissolve Your LLC or C Corporation
If you’ve been operating as a C Corporation, Limited Liability Company, or Partnership, all business associates need to vote on closing the business and the final vote should be recorded in the meeting minutes. If shares were issued in a Corporation, 2/3 of the voting shares must agree on the dissolution. If no shares were issued, the Board of Directors must approve to dissolve the company. Specific rules for LLCs vary by state and you should review the dissolution requirements in your state’s Limited Liability Company Act.
After the vote, you’ll need to file a form called “Articles of Dissolution” or “Certificate of Termination” with the Secretary of State’s office in the state where your LLC/ or Corporation was formed.
If you’d like help filing this paperwork, you can contact a CorXec business specialist to file the paperwork to close your business for you today. We’ll make sure you follow your state’s instructions to the letter, so your dissolution will be processed as quickly and smoothly as possible.
2. Pay Off Any Debts
In order to properly close your business, any company debts must be paid. In most states, an LLC or Corporation must settle its debts before you can distribute any money or assets to the members. If your business doesn’t have enough money to pay off the loans and debts, you should consult with an attorney.
3. Close Your Federal and State Tax Accounts
Just because your business isn’t bringing in any revenue anymore, it doesn’t mean you’re automatically off the hook with the IRS. You’ll need to notify the IRS that your business is no longer operating by closing your Employer Identification Number (EIN). You’ll also need to file your final federal and state tax returns (check the box indicating that this will be the final return). And if applicable, your company’s payroll withholding taxes must be up-to-date. Members or owners can be held personally liable if the business’ payroll taxes aren’t paid.
4. Cancel Any Business Licenses or Permits
Contact the county where your business is located and cancel your business license, as well as your seller’s permit or any other permits you hold. Be active about canceling these things, because you could still be assessed fees and taxes if the county doesn’t know your business is no longer in operation.
5. Notify Vendors, Contractors, and Clients
If you’re closing a business, you’ve most likely already made preparations for stopping work with your customers or clients. However, you should also notify any contractors, freelancers, vendors, and suppliers that you’ve done business with. Don’t just leave them guessing why they haven’t heard from you in a while. By being considerate and upfront with your network, they’ll be more likely to join you on your next project.
Final Thoughts
Walking away from your business is never an easy decision, but closing a poorly performing business can be the smartest thing you’ll ever do. You’re freeing yourself for the next big thing.
Remember to take closing your business just as seriously as you did opening it. Your credit and reputation are at stake. Start your Order of Dissolution online with CorXec.
