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
TradingCould incorporating your business help protect it? Find out here.
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