If you have come to the conclusion that your business needs to close, this step-by-step guide will give you an idea of what to expect. Of course, the best way to ensure that your business is dissolved properly is by working with an experienced business lawyer who can tailor the process to your individual needs.
Overall, here are the eight basic steps involved in dissolving a business:
Follow the requirements of your business articles. If your business is a partnership with a written partnership agreement, an LLC or a corporation, then you will need to follow the rules of dissolution that are found in the partnership agreement, articles of incorporation, or your state’s laws.
File dissolution papers with the state. Filing a Certificate of Dissolution lets your business’ creditors know that the business cannot take on any more business debt, which prevents your partners from taking on any further debts or obligations after you have made the decision to dissolve.
Notify tax agencies such as the IRS. It’s extremely important to make sure that your business’ taxes have been paid for all prior years as well as the current year. The IRS has a checklist to help business owners who are dissolving, but a better idea is to consult with a lawyer or tax specialist for help.
Cancel your business licenses and permits. Make sure to track down all agencies that have granted your business licenses and cancel them. This prevents others from using your business’ name and leaving you on the hook for taxes and penalties.
Notify your business’ creditors and settle their claims. You have a duty to inform the business’ creditors of the dissolution so that they can settle their accounts with you. Specific guidelines apply to corporations and LLCs and they vary state-by-state. Next is paying creditors in full or working out a compromise.
Collect any debts that are owed to the business. In most situations, you don’t have to tell the parties that owe the business money that the business is dissolving. It’s important to collect the monies owed as soon as possible because it will be much harder to do after the business has closed.
Liquidate the business’ assets. Finally, it’s time to sell what’s remaining of the business tangible and intangible assets. You can read more about the steps involved in liquidating a business in this past post.