What you need to do to close up your business
If your business has had a successful run and you are ready to walk away from it, there are some important procedures you need to follow. The Internal Revenue Service provides tips on how to properly close up your business so you can make sure your final payroll taxes are paid along with your regular taxes. You must also pay capital gains on any business assets that you sell for a profit.
Just like when you were running your business, the IRS was pretty strict about payroll taxes. They have a reputation for being very strict about paying your payroll taxes on time and if you can't pay, they are going to penalize you and force you to work out some type of settlement deal with them. The IRS has a checklist you can use to make sure you are able to close out all of your accounts and other things pertaining to your business.
When you close your business, you are responsible for paying those final taxes. If your business cannot pay for them, the IRS may force you to pay them out of your personal bank account. This is why it is important to do a financial assessment of your company ahead of time so you can make sure you are setting aside enough money to pay for your final taxes.
Any real estate, inventory, and business assets you sell are subject to capital gains taxes. Work with a tax lawyer to figure out if you should sell off the assets individually or if you should sell them altogether. You may end up saving money by selling them all at once versus individually. Selling off your assets for a 10% discount and then continuing to discount them as you are selling them off will save you money on capital gains taxes.
It is also important to inform your customers that you are closing your business. This may come as a shock to a lot of customers and suddenly closing your doors without notice is never a good business practice. Depending upon the type of business you run, simple ads that state you are closing will work or you may need to personally call your clients and let them know you are closing up your business. A lot of businesses like to refer their customers to another business that is in the industry that they trust and respect and it's a great way to end your business on a high note.
Make sure you complete all of the final legal procedures. You must file your final W-2s and 1099s. You must also file an official corporate notice that states you are closing your business. The only time when you can just close up without worrying about legal consequences is if you are operating as a sole proprietorship.
Corporations must arrange for the discontinuation of benefits like your health and dental insurance, pension plans, and other things. Once you have handled all of these final steps you then need to worry about the small things like shutting off your power, water, gas, and other utilities.
You also need to cancel all your business permits and licenses. There are different ones for each state and for your business entity so make sure you remember to cancel all of them. It's not easy to close up your business as this may have been your lifelong dream to operate your own business. Make sure you are mentally and emotionally prepared for the business closure and take time to meet with your employees well in advance to let them know you are planning to close up shop so they can get a new job.
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