Essential steps when dissolving your business

| May 22, 2020 | Business Owners

The decision to dissolve your business can be a difficult one, and the process of dissolving your business can be just as challenging. Before you can enter the next chapter of your life, there are several vital steps that you must take to close out your financial, contractual and tax responsibilities.

Follow any rules that you have previously established for your business’s dissolution.

Whether you have a partnership agreement or articles of incorporation, your business may have pre-defined steps for the end of a business. These steps may include voting among partners or shareholders to finalize the closure. Checking these guidelines first can help you avoid disputes later in the process.

Notify the government.

When you have decided to dissolve a partnership, LLC or corporation, you probably filed with the state when founding your business. Filing Articles of Dissolution will give the state notice that you are terminating your company.

You will need to notify local, state and federal agencies that you intend to solve the business. Because your company is still liable for taxes during its operation, you will need to continue making paycheck deductions, filing your quarterly or annual taxes and filing all relevant forms for the year. The state of Illinois gives guidelines for submitting this information with the state, and the IRS offers a checklist for business closure.

Canceling your business licenses with local governments or agencies is also an essential step if your company required a license to operate.

Notify your creditors and pay any debts.

Whether you had a line of credit for supplies used in your business, worked with a lender or had insurance for your company, notifying your creditors allows you to take appropriate action to pay that debt. This will enable them to be aware of the amount of time before your business will be dissolved and send you a claim for unpaid lines of credit.

You may want to work with an attorney at this stage because you could reject some of these claims and negotiate others. Handling these claims is a matter of state law, and your attorney can assist you in reviewing the claims you have received and determining your options for each.

Collect any funds owed to your business and sell any remaining assets.

Just as it is important to pay off your business’s existing debts to the best of your ability, you should collect on the debts that other people and companies owe your business. You should also sell any remaining assets at this time. Once you fulfill all your business’s financial responsibilities, you will distribute your assets among the people who have a stake in the company.

Closing your business can be a complicated process, and experienced legal guidance can be an asset at any stage of this process. A qualified attorney can ensure that you fulfill all your company’s legal responsibilities and complete the process of dissolving your business with confidence.