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So long, farewell: Closing your LLC or corporation

All good (and bad) things must come to an end. Whether you have decided to close your business because you are struggling financially or you are simply ready to retire and relax for a while, you may not be aware that there are certain steps to follow to legally dissolve your LLC or corporation.

Like most small business owners, one of your first thoughts may be for your employees. Labor laws require you to notify them of your intent to close the business 60 days before the final day of business if you employ more than 100 people. California is a little more rigid, so consultants recommend that you know the laws for your state.

Your business's unfinished business

The IRS will want to know that you have fulfilled your responsibility regarding payroll taxes. In fact, if you don't notify them that this year's return will be the final one for your business, the IRS may continue to hold you liable for future taxes.

You probably have other loose ends involving your finances, and perhaps even debt. Notifying your lenders that your company is dissolving is a difficult step, especially if you don't have the means to resolve the debt. If this is the case, bankruptcy may be a viable option for you.

The formal end of your business

Because of the many entities you dealt with over the life of your business, you will likely have many items to officially cancel, including:

  • All licenses related to your business
  • Any permits your business was granted
  • Your business's name registration
  • Bank accounts and credit cards
  • Your IRS Employer Identification Number

Depending on the type of business you owned, you might have other items that will require your attention.

Don't leave it to chance

You can see that it is not as simple as putting a "closed" sign on your door. If you have legally registered your business for tax purposes, failing to follow the proper procedure for closing down your company may result in unintended consequences. To know for certain if you are required to go through these steps with your small business, you may benefit from the advice of a business attorney.

An attorney will protect your interests by making sure you have completed the proper paperwork and complied with California laws for closing a business. You may also seek the advice of a lawyer to discuss debt relief options. If the dissolution of your business results in legal action between you and former partners or employees, having a knowledgeable attorney at your side will ensure that you will be effectively represented and defended.

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  • Santa Clara County Bar Association | 1917
  • American Inns of Court
  • CWL | California Woman Lawyers
  • Bay Area Bankruptcy | Forun
  • The State Bar of California
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