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. Taxes

    Partnership Tax Filing Deadline is Now March 15th

    The deadline is now a month earlier than last year, but you can still file for an extension.
  3. Personal Finance

    What Does a Creditor Do?

    A creditor is a person or entity that loans money or provides goods or services to another entity with the expectation of being paid back in the future.
  4. 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.
  5. Small Business

    4 Business Partnership Mistakes To Avoid

    When two or more people get together to run a business, the odds of conflict and financial risk increase without the proper controls in place.
  6. Taxes

    Late with Your Taxes? Grab IRS Form 4868

    Fill out this form to get a few more months to file your tax return. But remember, April 15 is still the payment due date if you owe taxes.
  7. 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.
  8. Taxes

    Is Filing an Early Tax Return a Good Idea?

    Filing an early tax return makes sense if you are receiving a refund, but what if you owe tax? There are more reasons to file early than just a refund.
  9. Taxes

    Seven Deadly Sins to Avoid During Tax Season

    Make sure your tax return is error-free before filing with these seven tips.
Frequently Asked Questions
  1. Why Do a Reverse Merger Instead of an IPO?

    Reverse mergers are often the most cost-efficient way for private companies to trade publicly.
  2. Determining a Firm's Percentage of Credit Sales

    Find out where to look for information about determining a company's percentage of credit sales.
  3. What Does the Diluted Share Price Reveal?

    Learn how diluted share price affects earnings and the company's overall financial performance.
  4. How Can Institutional Holdings Be More Than 100%?

    No entity can own more than 100% of a company's outstanding shares, but it can be reported that way.
Trading Center