Closing your business is more than just shutting your doors. You should be notifying the state and the IRS correctly and on time.
Closing a business can be just as full of red tape as starting a business is. And just like with starting a business, closing your business incorrectly can have major legal and tax consequences.
Before you close your business, you should hire a business attorney and a CPA if you haven’t already. They can handle much of the process for you – or at the very least, walk you through the steps.
Those steps include canceling state tax accounts, filing articles of dissolution, paying off any tax debt, and more. You’ll need to square up your obligations with both the state and the IRS. Tying up your loose ends with the state should be your first priority.
If you don’t follow the steps below, then you could face legal and tax repercussions.
Cancel your Florida tax accounts
Depending on your business, you may be registered to pay payroll tax, sales and use tax or other municipal taxes.
You need to visit the Florida Department of Revenue’s site to withdraw from those registrations and fill out the Request a Change of Business Name, Address, and/or Account Status form.
Since you’re closing your business, you would fill out this form and change your account status to canceled. You can also choose a date when that would become effective. You choose a date as far into the future as you’d like, but make sure all your state payments and filings are complete by then.
Pay any state and federal tax due
You need to make sure your state and federal tax debt is paid off before you can close your business.
Florida collects payroll and sales and use tax frequently, so you should be prepared to pay off your remaining tax liability. Payroll and sales tax don’t always apply to every business owner. You don’t owe payroll tax if you didn’t have employees other than yourself, and you likely don’t owe sales tax if you’re in professional services.
Along with paying any sales or payroll tax that’s due, you need to file your last corresponding tax returns.
You also need to pay off your federal income taxes before you can close your business. If you can’t afford to pay them all right away, your best option is to apply for an IRS payment plan.
Pay off any other debts
If you have any liabilities, you need to pay them off. That can include credit card bills, employee wages, leases and more.
This step is especially important because you might become personally liable for these debts without the protection of your LLC. This could open you up to potential lawsuits and other legal or tax trouble.
Check your books and balance sheet to verify what liabilities you have. If your books aren’t up to date and you don’t have the time or the skills to clean them up, consider hiring a bookkeeper.
While tying up your accounts payable, make sure you’re also caught up on accounts receivable. Reach out to customers that owe you anything before shutting down your business.
File and pay for Florida articles of dissolution
You filed articles of organization to register your LLC in Florida – and when you close your business, you need to file articles of dissolution.
You can e-file articles of dissolution on SunBiz.org. It costs $25 to file. You’ll need your document number to file it, which you can find on SunBiz.org’s business database by searching your entity’s name.
File your final business tax returns
LLCs taxed as partnerships or S corporations need to file business returns on top of their personal income tax returns.
If you haven’t filed one for every year you’ve been in business, then you need to catch up before you can shut down your business. You need to file it for every year your business exists – regardless of whether you made money.
After you’re caught up on returns for past years, you’ll need to file one more business return the year you closed your business and mark it final.
Cancel your EIN
One of the last steps to closing your business is canceling your EIN. Unfortunately, you can’t do this online. You can only do this by mailing the IRS with the following information:
- The complete legal name of the business
- The business EIN
- The business address
- The reason you wish to close the account
- A copy of your EIN notice letter when you received it (if you have it)
You’ll need to mail that information to this address:
Internal Revenue Service
Cincinnati, OH 45999
When the IRS accepts this and your tax filings , they will close your IRS business account.
Distribute assets among owners
The last thing to do is distribute any remaining money and assets. If you’re the only owner, everything goes to you.
But if there are multiple owners, you may need to divvy everything up. You should have created an operating agreement when you started your business that outlined how everything would be split up in the case your business shuts down. Follow your operating agreement when distributing your assets.
Contact a business attorney if there are any issues with your partners or operating agreement – or if you’re still not sure how to distribute everything.
Hold on to your records
You should save copies of your past and final tax returns, articles of dissolution and notice of EIN cancellation. And don’t throw away records of your business’ financials just yet. You should hang on to them for around seven years to be safe.
One reason you’ll need to keep your records is to file your last business tax return after closing your business, if your business was an LLC taxed as a partnership or an S corp.
You’ll also need to keep them in case Florida or the IRS tries to audit you or charge you for something you don’t owe anymore. Your documents will serve as proof that your business is no longer in operation.
The bottom line
Closing your business takes a lot of paperwork – and time.
You need to make sure you follow all the right steps to protect yourself from potential penalties and legal trouble. You can do this by hiring a CPA and attorney to guide you. Both the IRS and the state of Florida require you to follow certain steps like withdrawing tax registrations, canceling your EIN, paying off debt and more.
If you need experts in your corner to help make closing your business as smooth as possible, schedule a free call with a DiMercurio Advisors team member. You can take much of the weight off your shoulders and understand what tax moves you need to make next.