Closing a business is unfortunately often as complex as opening one. Legal and financial implications exist, and it goes far beyond simply stopping production and putting a closed sign on the door.
Dissolving a business is one good option for people. But what is it, and what does it do?
Steps to dissolve a business
Guidant discusses steps to closing a business. Some people may want to sell their businesses. Others have no buyer. Others still may no longer see a purpose in the business existing, or feel they have no need to stay open.
In the latter two cases, it is possible to dissolve the business. This terminates the business in the state’s eyes. Without dissolving the business, it remains registered with the state’s Tax Department. In short, it must still file reports and pay taxes. Failing to do so will result in typical penalties and fees.
A business owner must first take steps before dissolving their business. This includes closing all bank accounts, distributing remaining assets, filing an IRS form 966, canceling any licenses or permits for a business, publishing a notice of dissolution, and canceling the IRS account associated with the Tax ID number.
Voting on dissolution
Even before reaching this point, some business owners have other steps to take first. For corporations, the owner must hold an official meeting to discuss the possibility of dissolution and take a vote. If the board does not agree, the business owner may need to liquidate or find a buyer.
Members of an LLC must also vote for dissolution. Records of this vote will then become part of the LLC’s operation agreement.
After taking these steps, it is then possible to dissolve the business and officially close it down.