Sadly, the topic "How do I Close my Business" has achieved a salience it never had before. By some estimates, almost one third of small businesses will shutter their doors in 2020. Hardest hit, are hospitality and entertainment (restaurants, bars, hotels, travel and tourism facilities). Performance venues and live performance have all but disappeared from the scene. (e.g. In August, Columbia Artist Management, one of the premier agencies representing classical music performers, said it is shutting down.)
In response to the increasing need for business shutdown information, the IRS has added a new page to their website. The page summarizes the steps required to shut down a business - from the IRS's perspective:
File a Final Return and Related Forms. The type of return to file depends on whether the business is a sole proprietorship, partnership or corporation. The page features a section for each business type. Business owners can click on the section that applies to them to get the returns and forms they need.
Take Care of Employees. Business owners with one or more employees must make final federal tax deposits and report employment taxes.
Pay the Taxes Owed. Even if the business closes now, tax payments may be due next filing season.
Report Payments to Contract Workers. Businesses that pay contractors at least $600 for services (including parts and materials) during the calendar year in which they go out of business, must report those payments.
Cancel EIN and Close IRS Business Account. The IRS cannot close out an account until the business has filed all necessary returns and paid all taxes owed.
Keep Business Records. How long a business needs to keep records depends on what’s recorded in each document.
It also provides links to help business owners who are declaring bankruptcy, selling their business and terminating retirement plans.
If you find yourself confronting business closure issues, you may also want to review other sources: The IRS pages deal well with IRS compliance but are lean or bare with regard to state requirements and general business practices surrounding closures: For general information - take a look at
Nolo Press' Checklist for Closing a Business
For tax and governance requirements, refer to your State revenue agency and Secretary of State Guidelines (Examples)
California Franchise Tax Board, How to Close A California Business
California Secretary of State (Business Portal), Close a Business
New York Department of Revenue, Close and End a Business in New York
Dissolution is not, for the most part, a DIY activity. If you face this issue, we can help (for some of it) or refer you to appropriate counsel. Give us a call!