- January 23, 2024
- Kelvin Birk
- Business
How to Shut Down a Business
Closing a business may not be as exciting as opening and running one, but when done properly, it may not be a negative experience, and it can lead to positive opportunities and new successes for you in the future. There are certain steps, paperwork, and procedures necessary for the process of dissolving a business. Depending on the size, structure, and complexity of your business, the process can take anywhere from weeks to years to be completed, and there are laws that must be observed to prevent problems and potential lawsuits from arising. The situation can be daunting at first, but an experienced Missouri business attorney can provide guidance and legal advice tailored to your individual circumstances that helps ensure that the process is completed correctly and in compliance with relevant laws.
The following is a guide for the process of dissolving a business.
How to Close a Business – Steps to Take
If you are considering closing your business, it is important to do so in a logical and practical manner by taking the following steps:
Make the decision to close
Sole proprietors can decide to close their business on their own, but any type of partnership requires the co-owners to agree to close the business. Depending on the structure of your business; whether you are a partnership, corporation, or limited liability company (LLC), you and your business associates must agree to dissolve the entity by following either the procedures set out in your organizational documents or the Missouri business statutes. If your company has a board of directors, you may need a board resolution to dissolve the business, and this should be created and approved according to your company’s bylaws. If your business is a corporation, you may need the approval of shareholders to dissolve, and this is typically done through a vote according to your company’s bylaws, whether by a majority of the owners two-thirds majority, or even unanimous vote.
The decision to dissolve should be recorded with a resolution in the minutes of a meeting or with a written consent form.
Examine your choices
Depending on your situation, you may have several choices as to what will happen to your business. You may choose to sell the business to another individual or corporation, or you may want to liquidate it and sell the business assets. You may also choose to pass the business to children, other family members, or employees.
If your business is in good enough shape to pass it on or sell it, you should consider taking steps to enhance the value of the company, and also to institute some sort of training program for your successors to help ensure continuing success. If the business is overwhelmed with debt and liabilities, you may have to wind up filing for bankruptcy, and you should seek legal counsel as to how to best prepare.
File Articles of Dissolution and Necessary Forms
If you want to close a business that is a corporation or LLC, you will need to file all required forms and paperwork to officially dissolve your entity. According to the Small Business Administration, failure to legally dissolve an LLC or corporation will expose you to continued taxes and filing requirements. Officially dissolving your business in Missouri also puts creditors on notice that your entity can no longer incur business debts.
Forms to complete the dissolution of a company can be found on the Missouri Secretary of State’s website. These include:
- All for-profit corporations must file the Articles of Dissolution by Voluntary Action, Request for Termination and Resolution to Dissolve.
- LLCs must complete Articles of Termination for a Limited Liability Corporation.
- Limited partnerships must also file the Certificate of Cancellation of Limited Partnership.
- Limited Liability Partnerships must also file the Notice of Withdrawal for a Limited Liability Partnership.
In addition, there are required federal forms, which can be found on the IRS website. For a sole proprietor, this includes Schedule C: Profit or Loss from Business; Schedule SE: Self-Employment Tax; and, if any assets are sold, Form 4797: Sales of Business Property. There are also forms needed if the business is sold, for each person to whom you paid at least $600 for services, and for remitting excise taxes to the IRS.
How to Close a Business – Final Actions to Take
After filing required forms, as you head toward the goal of dissolving your business, there are several actions you need to take to prevent problems. You should:
Take care of taxes
Settle any outstanding state tax liabilities, and get a tax clearance letter from the Missouri Department of Revenue which can be included with your dissolution documents.
If you have employees, you will have to submit several federal forms regarding taxes: Form 940: Employer’s Annual Federal Unemployment Tax Return, and Form 941: Employer’s Quarterly Federal Tax Return, due in the quarter in which you pay your employees for the last time. You should also provide W-2 forms to your employees for that calendar year, and Form W-3: Transmittal of Income and Tax Statements.
Cancel Business Licenses and Permits
If you hold a local business license, notify your local government office that your business is closing and check to see if there are other required forms or procedures. Cancel all registrations, permits, licenses, and business and trade names to protect your finances and reputation.
Notify Creditors
Notifying known creditors of the dissolution helps protect against any potential legal claims that may arise later. For further protection, put an announcement in your local media that you are closing or selling your business so you will not be held accountable for any future acts by a business with the same name.
Settle debts and fulfill any remaining business obligations
Pay all bills, and obtain letters indicating that you have paid in full. Collect any outstanding receivables before you close the business. In settling your company’s debts and distributing assets, Missouri law requires you to make payments in a particular order, with creditors paid to satisfy any debts or liabilities before members and former members.
Maintain records
Keep documents such as tax and employment records for three to seven years to protect against unforeseen problems.
Get Help Shutting Down a Company
We Help with Dissolution of Companies
While being faced with dissolving a company can seem overwhelming, you do not have to take the chances of running into problems by doing so on your own. Attorney Kelvin Birk has helped many entrepreneurs and owners manage legal issues related to shutting down or selling a business and has received outstanding client testimonials from satisfied clients. Mr. Birk is both a lawyer and a Certified Public Accountant, which means he understands the law, accounting, and a myriad of financial issues that arise with shutting down a company. He is fully prepared to help you ease the process quickly and efficiently.
To learn more about the legal services we provide and how we can help you, call the Birk Law Firm at 573-332-8585 for a free consultation.
Attorney Kelvin Birk
Kelvin Birk is a lawyer as well as a certified public accountant, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters. This combined expertise allows our law firm to provide a level of service above that of other firms. Whatever your legal situation, your attorney at Birk Law Firm can counsel you as to the tax implications. We have experience in providing myriad legal representation services to residents of southeast Missouri and other areas.. [ Attorney Bio ]
