Just as every small company owner must prepare for tax season, a sudden surge in sales, and what to do when an employee leaves, he or she must also have a good plan B in place in the event that he or she must shut shop at some point. Even if company has been going well and you believe you have a good business plan in place for the next five years, it is always preferable to be prepared and aware of what follows next if you fail. The reasons you may decide to close your doors vary – it might be due to a lack of sales, a high turnover in personnel that results in a lack of individuals on the team, or your company may still be suffering the affects of the economic crisis too severely.
If the time comes to close the doors, the wisest course of action is to legally dissolve the company with the state. If you do not file for dissolution, you may be penalised with extra taxes, yearly state fees, late fees, and other expenses. Here are my four easy steps for officially ending your company with the state.
1) Submit the Articles of Dissolution.
When a company closes, it must submit Articles of Dissolution (also known as a certificate of dissolution or a certificate of cancellation) to formalise the closure. If you do not submit your articles of dissolution, your company will continue to be an active entity in the eyes of the Secretary of State. That implies that, even if your company is formally closed, you must continue to file yearly reports, pay state fees, and pay taxes.
2) Carry out the cleanup.
Although submitting your articles of dissolution prevents you from having to pay any future taxes, you must still complete an annual tax return for your final year of operation. Even if you did not do business for the full year, you must pay for the period you were in business. Check the ‘final tax return’ box when submitting your last tax return to alert the state that this is your last one. This also applies to your employment tax return – don’t forget to file your most recent one!
3) Inform everyone that you are shutting.
Is your company officially registered with the state? Inform the state that you have dissolved the company. Inform all insurance providers and anybody who has previously worked for or with your company that your doors will be closed. Your partners, in addition to those who offered a service to your company, should be aware. It is customary to send a brief message or email informing your business partners that you have liked working with them but will no longer be doing so.
4) Sell whatever you can
Sell what you can and already possess from your firm to recoup some of the money you may be losing. Make sure to record all of your company’s assets and take stock of what you have so that you can make the most of it. And keep in mind that just because you’ve closed the doors on one specific company endeavour doesn’t mean you can’t start another one or incorporate again later! What doesn’t always work out at one point in life may work out later — be focused and continue to pursue your small company objectives.