A corporation can close voluntarily or by state suspension, which can happen if the company fails to meet its corporate tax obligations.The steps involved in closing the business are the same for all types of corporations in a particular state. Although state rules share many similarities, some laws vary by state. As a starting point, review corporate dissolution laws and get the required forms for your state. While you can get this information from your secretary of state and review it on your own, the U.S. Small Business Administration recommends that you get expert legal advice.
File Dissolution Documents
After voting to dissolve the business, file dissolution documents with your secretary of state in person or by certified postal mail with a return receipt. All states require that you file articles of dissolution to stop tax and informational filing obligations. Although specific requirements may vary by state, articles of dissolution are generally informational in nature. For example, most states require that you provide the name of the corporation, the filing date, the reason for dissolving and information about any pending legal actions or unpaid taxes. Some states may also require a list of all debts, liabilities and assets the company holds.
Inform the Public
Contact the secretary of state for every state in which you do business and request an application of withdrawal. This document, which is similar to the dissolution document filed in your home state, ends your liability for paying taxes and annual report fees. Notify your employees and creditors that you intend to dissolve. The SBA recommends that you also cancel all business licenses and permits. In addition, some states require that you file a notice of intent to dissolve with your county clerk of courts.
Meet Tax Obligations
Meet all federal and state tax obligations before you pay any other debts. Within 30 days of filing dissolution documents, file Internal Revenue Service Form 966 Corporate Dissolution or Liquidation. Return shareholder investments and include Form 1099-DIV for shareholders who receive $600 or more. After filing a final state tax return, get a tax clearance or verification of good standing if your secretary of state requires this document to verify that all state taxes are paid.
Liquidate capital assets and settle outstanding debts with lenders and creditors. Cancel business credit cards, but do not close bank accounts until you receive all the money that other people, such as customers, tenants or vendors, owe you. Finally, store and maintain business records, especially tax and employment records, for three to seven years.
Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.