Deciding to close your Michigan business does not mean you simply shut your doors to consumers. Whether you are going out of business or simply want to sell your business, the most pressing requirements are the tax and license issues involved. Tangent issues include your employees' loss of jobs and health care benefits in a poor economy. According to the U.S. Small Business Administration, just shy of 400,000 businesses close each year – with only half surviving past the five-year mark.
1. Complete the Transfer Paperwork
If you are closing out your business by selling it, complete and deliver the "Business Transferor's Notice to Transferee of Unemployment Tax Liability and Rate, form UIA 1027" to the new business owner two or more days before the transfer occurs. State law requires that the seller or his legal representative fill in this form to fully disclose to the buyer any unemployment tax liability that he may incur. The buyer acquires all unemployment tax liability, including fees and penalties.
2. File Michigan Form 163
The "Notice of Change or Discontinuance, Form 163" or a letter must be sent to the Michigan Department of Treasury, Registration Section, to advise that all business and associated accounts will be discontinued. Include all relevant account information.
3. Pay Delinquent Taxes
Pay any delinquent taxes to the Michigan Department of Treasury. This includes any past tax, penalty and interest your business owes. You will know what specific taxes, because you will receive a letter of inquiry, notice of intent to assess and/or a final assessment bill for taxes due from the Michigan Department of Treasury.
4. Get Tax Clearance in Michigan
Ask for a "Tax Clearance Certificate" once any outstanding tax liability has been paid in order to document that no tax liability will pass to the buyer of the business. If the owner is simply going out of business rather than selling, then the certificate is proof that the owner has paid all taxes and is cleared of any tax liability.
Things You Will Need
Your business license is not the same as your professional occupational license. Michigan has no generic business license to surrender upon closure of your business.
Closing a business does not negate your professional license unless it is revoked because of serious misconduct.
Both the Michigan Department of Treasury and the Unemployment Insurance Agency may file liens against business owners and/or corporate officers if taxes owed remain unpaid. This can include a warrant to seize property, which will be sold to pay off the tax debt.
Small businesses pay 44 percent of the private payroll in the United States, so closing your business may affect many people.