So You Want to Dissolve a Business…

by Deborah Sweeney 

Whether things didn’t work out with your last venture, or you’re just moving on to something new, sometimes businesses close. Unfortunately, a lot of small business owners don’t know that there’s a process beyond simply closing their doors and putting a sign on the door. If you fail to officially dissolve your business with the state when the time comes, you could end up paying unnecessary taxes, annual state fees, late fees, and additional charges. To avoid all that, follow these four steps:

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. You have the option of doing the paperwork yourself, but many small business owners opt for the use of a filing service to help ensure all the paperwork gets done correctly. If you do choose to file the articles yourself, just be sure to do your research- one incorrect paper could add up to some hefty charges.

2. Don’t Forget About the Annual Tax Return

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 of doing business. Even if you didn’t do business for almost 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.

3. Tell the Necessary People That You’ve Closed

Is your business registered with the state? Contact the state and let them know you’ve dissolved your business. All of the insurance providers associated with your business?  Let them know the same. Anyone who has previously worked for or with your business needs to know that you will no longer be there. More than just the people who provided your business a service, like the state and your insurance broker, your partners need to be notified as well. Just a small note or an email letting them know that you’ve enjoyed working with them, but you will no longer be conducting business, is the courteous thing to do.

4. Try and Make Some Money

Lastly, regain some of the money you may be losing by selling what you can of your business. Everything from office necessities like the break room refrigerator to supplies and company machinery. Just be sure to report all your business assets.  Take stock of what you have, and make the most of it.