Is it time to close your business? The red flags are:
- Are you using your personal credit cards to run your business?
- Is your personal health decreasing?
- Do you love your product more than your customers?
- Are your key employees leaving?
- You no longer enjoy your business?
- The business is too far in debt to recover, ever.
Liquidating assets usually comes as a last-resort strategy after no buyers, merges, or successors appear on the horizon. This process of redistributing assets to creditors and shareholders still requires a sound plan of action.
If there is more than one owner, then an agreement to wind down the business with all is required.
- Liquidate assets
- Prepare an inventory and determine assets for sale
- secure your merchandise
- set liquidation value of assets with a qualified appraiser
- use that value to estimate net sale proceeds and re-evaluate your decision
- choose sale type: negotiated, consignment, internet, sealed bid or retail
- Pay creditors
- Close customer accounts
- Lay-off staff – comply with employment and labor laws. Worker Adjustment & Retraining Notification Act (WARN) if 100 employees or more.
- Prepare and file the Final tax returns for income and sales tax
- Cancel Employer Identification Number and close account
- Notify federal and state tax agencies.
- Cancel all registrations, permits, licenses, and business names.
- Maintain records and keep for 3 – 7 years
What to provide to Christiansen Law Offices?
- Copy of the Articles of Organization and list of Stock/Owners.
- A copy of all registrations, permits, licenses, and business names.
- Copy of the EIN Assignment Notice
- Copy of all UCC-1 Filings and related contracts
- List of Assets
There are typical actions that are taken when closing a business. You must file an annual return for the year you go out of business. If you have employees, you must file the final employment tax returns, in addition to making final federal tax deposits of these taxes. Also attach a statement to your return showing the name of the person keeping the payroll records and the address where those records will be kept.
The annual tax return for a partnership, corporation, S corporation, limited liability company or trust includes check boxes near the top front page just below the entity information. For the tax year in which your business ceases to exist, check the box that indicates this tax return is a final return. If there are Schedule K-1s, repeat the same procedure on the Schedule K-1.
You will also need to file returns to report disposing of business property, reporting the exchange of like-kind property, and/or changing the form of your business. If you do not have a pre-printed envelope in which to send your taxes, refer to the Where To File page for a list of addresses. Below is a list of typical actions to take when closing a business, depending on your type of business structure:
- Make final federal tax deposits
- File final quarterly or annual employment tax form.
- Issue final wage and withholding information to employees
- Report information from W-2s issued.
- File final tip income and allocated tips information return.
- Report capital gains or losses.
- Report partner's/shareholder's shares.
- File final employee pension/benefit plan.
- Issue payment information to sub-contractors.
- Report information from 1099s issued.
- Report corporate dissolution or liquidation.
- Consider allowing S corporation election to terminate.
- Report business asset sales.
- Report the sale or exchange of property used in your trade or business.
Closing EIN Number
- The IRS cannot cancel your EIN. Once an EIN has been assigned to a business entity, it becomes the permanent Federal taxpayer identification number for that entity. Regardless of whether the EIN is ever used to file Federal tax returns, the EIN is never reused or reassigned to another business entity. The EIN will still belong to the business entity and can be used at a later date, should the need arise.
- If you receive an EIN but later determine you do not need the number (the new business never started up, for example), the IRS can close your business account.
- To close your business account, send us a letter that includes the complete legal name of the entity, the EIN, the business address and the reason you wish to close your account. If you have a copy of the EIN Assignment Notice that was issued when your EIN was assigned, include that when you write to us at:
Internal Revenue Service
Cincinnati, Ohio 45999
Note:If (1) you made a Federal Tax Deposit or other Federal tax payment, (2) are liable for any Business Taxes, or (3) the IRS has notified you that a business tax return is due, you must file the appropriate tax return(s) before we can close your account. See previous list for other actions you may need to take.