You would think that when you go out of business, that you must immediately inform the IRS, the state, the local government, and all licensing boards. There seems to be a twinge of "fear factor" for the out-going businessman. "What if I don't tell them? Won't they penalize me and keep charging me for business taxes?"

It is really much simpler than all this. These are the steps we recommend for shutting down a business. If you are simply selling the business, the procedure is the same. Use the following list as a check-off list.

1. FINAL RETURNS
   1. File all returns in the normal way at the normal times. For example, if the quarterly reports are due three months after you close or sell the business, wait until the quarterlies are due.
   2. Write "FINAL" across the sales tax returns. Most sales tax returns also have a box to check indicating that this is the final sales tax returns.
   3. The IRS Form 941 as well as the state quarterly reports all have boxes to check to indicate that this is the final return.
   4. Wait until the end of the year to file annual forms such as Form 940 and the W-2's.
   5. Even when you do it right, expect the local governments to continue to send you blank sales tax returns. Fill these out with zeros and mark "FINAL" again. It usually takes two and sometimes three "FINAL" sales tax returns before the state/local government removes you from their roles.

2. CHANGE OF ADDRESS
   1. File federal form 8832 with the IRS to report your change of address. This is important even if you have taken care of all federal forms. The IRS has a nasty way of sending out notices about small problems up to two years after a business has closed or been sold. Usually these matters are easy to deal with if you get the first notice, but become a potentially serious problem if you do not know about them and do nothing for several years. You can get this form from the IRS web site at http://www.irs.gov.
   2. There are two things you should do with the U.S.Postal Service:
      1. Fill out a forwarding order.
      2. Get a change of address kit. This kit contains postcards for you to fill out and send to vendors to give them your forwarding address. Even if you feel that there is no further reason to keep in touch with a vendor, it is still a good idea to give him your new and final address.
   3. You can do much of this on line at http://www.usps.com.

3. LICENSES & PERMITS
   1. Virtually no license or permit is transferable to a new owner. Therefore, whether you sell a business or simply go out of business, your required action is the same.
   2. Remove all the licenses and permits that you had previously publicly displayed.
   3. There will usually be instructions on the form itself telling you what to do with each license or permit. In most cases, you simply mail the form back to the issuing agency.

4. DISSOLVING CORPORATIONS
   1. Most owners are eager to dissolve the corporation immediately.
   2. Don't.
   3. You still have a final tax return to file.
   4. You still have final bills to pay and you will continue to receive deposits made payable to the corporation. These payments may include items such as:
      1. Utility company deposits
      2. Various payments for unused monthly services
      3. Final adjustments
      4. Tax refunds
   5. If you dissolve the corporation and receive a $1,000 refund check a year later, you will have a lot of trouble cashing the check.
   6. We recommend that you keep a corporation for two calendar years after closing or selling the business.
      1. In most states, you will have to pay a minimum annual fee to the Secretary of State and another to the Department of Revenue. These together will usually cost less than $100.
      2. When you do fill out and file the dissolution forms available from your Secretary of State, there will be a fee of $100 to $200.

Copyright © - 2004 Dutch Hawkins Mandeville, LA USA - All Rights Reserved

October 12, 2004