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. Trading

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  2. 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.
  3. Taxes

    Should You File An Early Tax Return?

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

    Inaccurate Tax Return, Now What?

    If the IRS finds errors, it will cost you. Find out how to fix them, and how to prevent them in the first place.
  5. Taxes

    3 Common Tax Questions Answered

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

    Explaining Corporate Tax

    A corporate tax is a tax levied on the profits a corporation generates.
  7. 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.
  8. Taxes

    Next Season, File Taxes On Your Own

    Master these fundamentals and you'll be doing your own taxes with minimal stress.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center