7 Steps to Dissolving A Business
Dissolving a business can be a stressful process but it can actually be broken down into a step-by-step process that all businesses follow when deciding to end their operations.
1. First, if the business is a corporation or LLC, there should be bylaws stating exactly how the operations should cease and all required steps of the dissolution. The decision should always be documented and all individuals with vested interest should be notified properly i.e. shareholders, partners, board members. If the business is a corporation, the issue will have to be voted on by shareholders and the final decision should be recorded.
2. The second step would be to formally dissolve the business with the state and other states if the business branched beyond Alabama. The second step is to ensure that you are no longer liable for taxes or filings with the state. Even if you do not have to formally dissolve your business with the state because the business is a sole proprietorship or general partnership still ensure that the government and creditors are aware of the dissolution; visit http://www.sos.alabama.gov/ to download necessary forms.
3. For steps three, four, and five, you may want to seek expert advice. The third step is to file all federal, state, and local tax forms; the IRS website actually has a detailed checklist where you can find all the required documents needed for this step. One key note to remember is to always pay any kind of taxes before any remaining debts. However, an experienced accountant can provide additional insight to any tax obligations or credits you may be eligible as a result of the dissolution of your business.
4. In step four, you will begin cancelling any business permits, licenses, registration, and business names (keep in mind county and state) your company is currently operating under. Taking this step will stop the accrual of any new local taxes, fines, fees your business is required to pay at the time of the dissolution. Additionally, taking this step may help save your reputation by preventing someone else from attempting operate under your business name, licenses, or permits without your knowledge.
5. The fifth step requires notification of all creditors, suppliers, lenders, landlords, employees, service providers. When dealing with creditors ensure that you are aware of the timeline filings must take place (usually creditors have 120 days to submit claims against your business). Once you have received all accounts payable, you should start attempting to settle the claims of the creditors.
6. Likewise, the sixth step is to ensure that you have complied with all employment and labor laws by issuing payroll to employees in the proper time allotted. You will also want to ensure that you have paid all state and federal payroll taxes prior to the dissolution of the business. To ensure this is done properly, you may want to seek the advice of an experienced accountant.
7. The seventh step of the dissolution process encompasses many small activities that will help you to resolve your financial obligations i.e. distributing assets, and settling debts with landlords or banks. You will need to close any bank accounts or other business accounts associated with your company.
Lastly, it is critical that you keep and maintain accurate records of your business operations and business dissolution. Records of dissolution should be kept for at least 7 years. Remember to always enlist the advice of experienced professionals such as: attorneys, bankers, brokers, accountants, etc. if you are unsure of any steps outlined here. Experienced professionals are skilled in helping you protect your individual rights and limit any potential liabilities you may have during the dissolution process.