This is a contributed post by Deborah Sweeney, the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Twitter @deborahsweeney and @mycorporation.
Just as every small business owner needs to prep for tax season, a sudden increase in sales, and what to do when an employee moves on, they also need to keep a solid plan B in mind in the event that he/she may someday need to close up shop. Even if business has been going well, and you feel you have a solid business plan in place for the next five years, it’s always better to be prepared and aware of what comes next should you go out of business. The reasons you may wind up closing your doors vary – it could be due to too few sales, high turnover in staff that leads to not enough people employed on the team, or your business may still be feeling the effects of the economic recession too strongly.
The best possible plan, if the time comes to go out of business, is to officially dissolve the business with the state. If you don’t file for dissolution, you could end up being charged unnecessary taxes, annual state fees, late fees, and additional charges. Here are my four simple steps to formally closing your business with the state.
1) File Articles of Dissolution.
When a business terminates, it needs to file Articles of Dissolution (also known as a certificate of dissolution or a certificate of cancellation) to make the close official. If you do not file your articles of dissolution, your business will go on being an active entity in the Secretary of State’s eyes. That means that legally, your business will need to continue filing its annual reports, paying state fees, and paying taxes, even if you are technically closed.
2) Do the clean-up work.
Though filing your articles of dissolution will stop you from having to pay any future taxes, you still need to file an annual tax return for your last year doing business. Even if you didn’t do business for the entire duration of the year, you still have to pay for the time you were in business. When filing your final tax return, check the ‘final tax return’ box to notify the state that this is your last one. This goes for your employment tax return as well – don’t forget to do your last one!
3) Let everyone know you’re closing.
Is your business registered with the state? Contact the state and let them know you’ve dissolved the business. For all insurance providers and anyone who has previously worked for or with your business, let them know that your doors will be officially closing. More than just those who provided your business a service, your partners should know as well. Sending over a short note or an email letting your partners know that you’ve enjoyed working with them, but you will no longer be conducting business is the courteous thing to do.
4) Sell what you can.
Regain some of the money you may be losing back by selling what you can, and already own, from your business. Be sure to report all your business assets and take stock of what you have, and make the most of it. And remember that just because the doors are closing on this particular business venture doesn’t mean you still can’t start up another business later on or incorporate again! What doesn’t always work out at one juncture in life may later on – stay focused and keep on pursuing your small business dreams.