There’s a lot to consider if you’ve decided to shut down your business. Doing so is a major decision and shouldn’t be taken lightly. However, it’s the best option for many business owners.
There are many reasons a business owner might decide to close down.
For some, it’s a matter of timing. They’re ready to retire or move on to something else.
Others opt to close due to financial issues. They might be trying to avoid bankruptcy or they’ve decided to file for bankruptcy. Sometimes it’s a combination of several factors driving the decision to end a business.
Regardless of the specific reason or reasons for shutting down your business, there are several things you’ll need to do. One of the most important is dealing with the tax implications that result from a business shutting down.
You have two things you’ll need to do to meet your IRS obligations when you shut down a business.
First, you’ll need to fulfill any federal tax obligations. Just because your business no longer exists doesn’t mean your tax responsibilities go away. You’ll need to reconcile any outstanding taxes owed before your business is officially closed for good.
The second step is to notify the IRS of your plans to close your business. The IRS needs to know to no longer expect a filing from your business in the future, once your immediate obligations are reconciled.
There might be additional requirements in your state, but these are the federal obligations.
Shutting down a business can be a complicated process, regardless of why you chose to do so.
The IRS offers a “Closing a Business” page that makes the process a little bit easier, at least from the tax standpoint.
Here, self-employed individuals and small business owners can find a variety of information and resources, including:
Additionally, there is information about the step-by-step process you’ll need to take when closing your business. This includes things you’ll need to do in addition to the two main IRS-related obligations.
For example:
There might be additional things you’ll need to deal with depending on the reasons for shutting down your business. For example, if you’ve declared bankruptcy and lost your business as a result, the court will step in to liquidate your business assets and repay vendors and creditors.
Ideally, you’ll work with a bankruptcy attorney to help you through the process. They can help you determine the tax responsibilities of shutting down a business and determine the best way to proceed.
If you’ve decided to shut down your business or you’re considering bankruptcy and you want to know how it affects your business, we can help. Contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA) or; (912) 324-3176 (Jesup, GA) to schedule a consultation.
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