Dissolution
When closing a business, the taxpayer must file an annual return for the year they go out of business. If you have employees, you must file the final employment tax returns, in addition to making final federal tax deposits of these taxes. The IRS asks that you attach a statement to your return showing the name of the payroll person and where the records will be stored.

The annual tax return for a partnership, corporation, S corporation, limited liability company or trust includes check boxes near the top front page, just below the entity information. For the tax year in which your business ceases to exist, check the box that indicates this tax return is a final return.

The dissolution of a sole proprietorship, partnership and limited liability partnership is fairly simple if all parties (partners, if any) agree on the dissolution of the organization and all creditors have been satisfied.  

Corporate dissolution can be a little more complicated, if shareholders and creditors are involved, and it involves the following steps:

  • Board of directors meeting to propose a corporate dissolution
  • Shareholder majority must approve the dissolution
  • File IRS Form 966 to dissolve the corporation
  • File required notice with the state of incorporation
  • Statutory notice to creditors
  • Processing and payment of all creditor claims


Disposition

Related Articles
  1. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  2. Financial Advisor

    Understanding S Corporations

    This corporate structure is favored by many entrepreneurs, including financial advisors. Here's an overview of its advantages and disadvantages.
  3. Taxes

    Taxes in New York for Small Business: The Basics

    Learn how small businesses are taxed in New York, and understand how tax rates vary based on whether the business is an S corporation, LLC or partnership.
  4. Taxes

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  5. Taxes

    How To File A Canadian Tax Return

    The process for filing a Canadian tax return is easy and streamlined. Here is the information you need to know before filing.
  6. Taxes

    Should You File An Early Tax Return?

    When it comes to filing your taxes, it can often pay to wait until the deadline.
  7. Taxes

    Common Tax Mistakes To Avoid

    Find out what mistakes people often make on their returns, and how to avoid them on yours.
  8. Personal Finance

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  9. Taxes

    Taxes in Texas for Small Business: The Basics

    Learn the tax implications for small businesses in Texas, and discover how different types of small businesses, such as LLCs and S Corporations, are taxed.
  10. Taxes

    Why Do So Many People Fall Behind On Their Taxes?

    Despite the threat of owing thousands of dollars to possibly the most feared organization in the U.S., millions of Americans continue to fall behind on their taxes.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center