Business owners throughout the country pour their time, energy and resources into a variety of businesses, large and small. However, despite all the work, some businesses are not successful and the owner must make the decision to close the doors. In addition to dealing with remaining inventory, paying final employee checks and handling the final expenses associated with shutting down a business, there is also the taxes that must be considered. Working with your tax professional or accountant, such as R&S Tax Service in Folsom, CA, to assist in filing the final tax returns for your business. Here are a few other steps to complete as you finalize closing your business.
Make Final Tax Deposits
While it may seem obvious, in the finalizing of paychecks and closing out of your payroll system, it might be easy to forget the tax obligations still outstanding. However, it is important to make any necessary tax payments, including those for payroll, business taxes to both the state and federal agencies and of course, any personal income tax for income received as an owner.
File All Tax Returns
If your business currently has to file quarterly and annual forms for employment and other taxes, then those final forms will need to be completed and filed. In addition, you will need to file a final tax return for your business in the appropriate filing period for the year your business closed. Keep in mind, this will also mean reporting any final capital gains or losses, as well as reporting any shareholder share information. You will also want to be sure to record any sales of assets or property, such as the office building or other property used in running your business.
Issue W-2s and 1099s
Once the business has officially stopped doing business, then you will need to issue all the necessary W-2s and 1099s for employees and vendors. Working with your payroll service and accountant, you will be able to complete this tax for your employees. Also, be sure to pay any final bonuses or paychecks prior to issuing the W-2s, to be sure you have noted correctly all the income earned.
Pay Final Expenses
In order to close the books of your business, you need to notify your vendors that your business will be closing. Give them the address for all final invoices to be sent and a reasonable time period of approximate 30 days. As these invoices come, pay and record your expenses as normal. Once all the invoices have been paid and all assets sold or transferred, the remaining funds need to be divided among the shareholders or recorded as income for the business owner.
Dissolve the Business
Depending on your state, there are various rules to dissolve your corporation or limited partnership. You need to file the final paperwork that essentially notifies the state that you are no longer in business and will not be performing business activities in the boundaries of the state again.
On a federal level, you will need to notify the IRS that your corporation is being dissolved and close out any necessary paperwork associated with your federal tax ID number. These last few steps should be completed after all taxes and other expenses have been accounted for.
Dissolving your business typically involves many administrative and filing tasks, so working with your accountant or tax professional to be sure that all of them have been completed in a timely fashion. This will help you to avoid any potential penalties or fees due to late tax filings and payments.
Keep Those Records
While your business may no longer be running, you are still required to keep all your records for a seven-year period. Thus, it is critical to make sure that you have copies or electronic scans of all the records relating to your business. Once the seven years ends, you may dispose of these records. It is recommended to use a secure shredding service to destroy any documents that have reached their seven-year limit to avoid any risks of fraud or other credit breaches.
In the end, while closing a business can be an emotional time, by completing these tasks, you can guarantee that your business has been closed completely and leave you ready to move on to the next opportunity.
Click on the link below to contact a professional at R&S Tax Service in Folsom, CA, to discuss the necessary steps for filing your final returns and the correct paperwork with your state, along with making the final payments on your tax liability.
