Knowing how to wind up a business in the US requires following a specific procedure. You can’t just shut the doors without caring for the financial matters.
To formally close your business, you must pay debts and protect yourself from future responsibilities. Following the correct procedures guarantees a seamless departure, regardless of changes in:
- You business strategies
- Market trends
- State’s regulations
Shutting Down a Business in 7 Steps
L&Y Tax Advisor explains how to wind up a business in seven mindful steps so you can step forward without worrying about your previous startup.
Obtain Owner’s Approval
The board of directors drafts a resolution to dissolve a business and needs shareholder approval. According to the operational agreement, LLCs typically need member permission. Carefully record all decisions to ensure legal compliance.
File the Documents of Dissolution
Submit Articles of Dissolution (a Certificate of Dissolution) to the Secretary of State in the city where you started your business. If your firm is registered in more than one state, you should file withdrawal letters in each state to end your company’s legal presence and responsibilities.
Fulfill Taxation Responsibilities
Your tax responsibilities do not instantly cease when your business is closed. You must file taxes for:
- Final federal
- State
- Local tax returns
- Payroll taxes
To verify that all the paperwork is filed correctly, go to the IRS’s business closure checklist.
Notify Creditors and Settle Debts
Notify all of your known creditors that your business is coming to its closure. Provide a postal address where they may submit claims and a deadline (usually 120 days following notification).
Based on the legal requirements, settle accepted claims and reject any disagreements in written form.
Cancel Licenses and Permits
To avoid further obligations or fees, cancel all the business:
- Licenses
- Permits
- Registrations
It includes filing a formal closure request to the IRS to terminate your Employer Identification Number (EIN).
Distribute Remaining Assets
Following debt settlement, divide any leftover assets among owners or shareholders based on:
- Ownership percentages
- Your operating agreement
- Your corporate bylaws
If needed, submit these distribution reports to the IRS.
Comply with the Corporate Transparency Act (CTA)
As of 1 January 2025, the CTA mandates small businesses to submit a Beneficial Ownership Information (BOI) report to the Financial Crimes Enforcement Network (FinCEN).
Compliance is essential even when closing your firm to avoid fines. However, recent legal developments have raised uncertainties about enforcement.
To fully comprehend your responsibilities under the CTA, it is recommended that you speak with a legal advisor.
The Bottom Line
When you know how to wind up a business, you can easily protect your financial interests. By carefully following these measures, you can limit any future liabilities and guarantee compliance with legal obligations. Always seek advice from financial and legal experts to negotiate the challenges of business dissolution successfully.
Contact our tax consultancy services to legally wind up your business.
