There comes the point when you must shut down activities and disband your company. Business dissolution can occur for various reasons, such as failure to pay required taxes in the state of incorporation, failure to file annual reports, insolvency, or owner-initiated voluntary dissolution. It’s a lengthy procedure that might be unpleasant. Here are five effective strategies for closing a business to make the process easier.
Register The Certificate Of Dissolution With The State
You must file documents with the state where the company was founded once shareholders or members have decided to dissolve the company. The procedure for submitting the Certificate of Dissolution (also known as the Articles of Dissolution) varies from state to state. Some states demand filing specific paperwork before informing creditors and settling claims.
Before filing the Certificate of Dissolution, certain states require the corporation to have its taxes cleared. The process can be lengthy, but Goodbye Startup can help you with your startup shutdown.
File Your Federal, State, And Municipal Tax Returns
Your tax obligations do not terminate instantly, even when your business is closing. You must formally notify the IRS and your state and local taxing authorities of the business termination. On the IRS website, there is a checklist for terminating a business that lists the necessary paperwork and provides connections to additional local and state regulations. If you have employees, be aware of your payroll reporting duties. Ensure you research and learn how to close a business right before beginning the process.
Inform Creditors Of Your Company’s Impending Closure
You must send letters explaining the following to each of your company’s creditors:
- That you have filed a statement of intent to dissolve your corporation, limited liability company, or both
- The postal address for creditors to send claims to (s)
- A list of the facts and details that the claim must contain
- The cut-off point for submitting claims
- A declaration stating that a claim will be dismissed due to submission delay
If the corporation dissolves, your state may permit claims from creditors that it was unaware of. You may have to publish a notification announcing your company’s dissolution in the local press. Contact Goodbye Startup’s experts if you need help handling the process.
Distribute The Remaining Resources
The leftover assets are distributed to business owners after paying all claims. Typically, assets are distributed based on the ownership percentage of the shareholders or members. For instance, if you own 80% of the company and your brother owns 20%, you will get 80% of the remaining assets.
Wind Up Everything
The company or LLC must finish up its business after the dissolution is granted. Activities during this time include:
- Paying off debt
- Notifying clients, partners, landlords, insurance providers, and suppliers
- Employee notification
- Revocation of registrations, licenses, and permits
- Withdrawing from foreign states.
There are many reasons why startups fail, and business dissolution is the next step when that happens. Dissolving a company is not easy, so engaging professionals is advisable to ensure you do it right.