At some point in your career, you may decide that the lure of greener pastures, or the siren song of long lusted after holiday destinations are now too hard to ignore. After years of putting in time at the corporate office, the firm, or slaving away in a skilled trade or industry overseeing the manufacture of golden widgets, you have now decided to close your business, and move on to pursue your heart’s true desires. However, before you are able to make that transition, you have recognized that there are several steps to complete before you can lock the doors, shutter the windows, or turn over the keys.
A majority of lawyers (including this one) do not engage exclusively in dispensing tax advice. An attorney specializing in tax law, or an attorney specializing in business practice, as well as a Certified Public Accountant (CPA), working together, may be indispensable partners with you in navigating the business closure process. Generally speaking, where the Internal Revenue Service is concerned, it is likely that you will have to file a tax return for the year that you close or transition from your business. In addition, you will have to file employment and payroll taxes for any employees, and if your business entity takes the form of a partnership, corporation, S corporation, limited liability company, or trust, there will be information to provide to the Internal Revenue Service to indicate that the return is a final return, and certain tax schedules (such as a K-1) may also need to be attached. A skilled attorney and/or qualified CPA can assist you in preparing and submitting the necessary documentation to ensure that you are in compliance with the appropriate tax regulations and requirements.
Practically speaking, there will be many other decisions that will have to be made. How and where and when to dispose of business assets, whether and how to exchange like-kind property, how to negotiate the non-renewal or cancellation of a lease agreement, how to develop a contract to handle the transition of a business asset to a new owner or partner, etc., are all important considerations. If you formed a corporation, partnership, limited liability company, S corporation or other business entity, you may also need the assistance of an attorney to file dissolution paperwork with the proper state entities, and to discontinue the assessment of fees, registrations, permits, licenses and other annual costs.
It may also seem obvious, but closing business accounts, credit cards, vendor lines of credit and third party obligations is a necessary step. You will likely need to set up a system of maintaining records for a period of time after you have ended your business. Creditors, regulators, government agencies, or other entitled groups may have a legitimate need or interest in gaining access to your records months or years after your business has ended.
The relief that comes with the initial decision to turn out the lights for good and walk away is just the first important step in deciding to end your business practice. The time-honored cliché that the “devil is in the details” is never truer than when one is attempting to make sure that all the necessary steps are being completed to ensure the proper closure of a business. If you need assistance with the closing or transition of a business, please do not hesitate to contact the attorneys at Fidelis Law, PLLC.