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

    Explaining Tax Returns

    A tax return is the form or forms used to file income taxes with the IRS.
  3. Taxes

    How to File a Tax Extension

    Learn the process you need to follow to get an extra six months to file your tax return.
  4. Personal Finance

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  5. 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.
  6. Taxes

    Explaining Corporate Tax

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

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  8. Taxes

    Taxes in California for Small Business: The Basics

    Understand the tax implications of running a small business in California, and learn which state taxes apply based on business type.
  9. Insights

    6 Tax Forms for Investors Who Have Money Abroad

    If you're a U.S. citizen or resident, and you own assets in other countries, you might need to file these six forms with the government.
Frequently Asked Questions
  1. Why is social responsibility important to a business?

    Take social responsibility seriously, and your business could benefit from happier, more productive staff members while helping ...
  2. Which socially responsible retailers appeal most to ethical investors?

    Learn why ethical investors have many options in the retail sector, and discover which retail companies are most popular ...
  3. What are Some Examples of Free Market Economies?

    Learn which of the world's economies best resemble free market economies, marked by free trade, low government involvement, ...
  4. Who Decides When to Print money in India?

    Find out the role of the Reserve Bank of India, or RBI, and the amount of authority given to the government. Learn who is ...
Trading Center