Business entities can close or shut down for a variety of reasons. Death, lack of business, loss of interest, a lack of time, and many other factors can make it easier to just close up shop.
The process of closing your business can be a stressful and upsetting one. It’s not easy to decide to put an end to something you’ve likely put a lot of time, energy, and heart into over the years. Additionally, there’s still so much to do.
Once all business activity has ceased, you may think that you’re free to move onto the next part of your life. But not quite yet. If you’ve recently shut down a business, it’s important for you to also dissolve that business, rather than just abandon it. Here are a few reasons you should do that:
Formally Closing Your Business
Your business is not really formally closed until it is dissolved in the state that it was originally incorporated in. In all other states it has legally operated, the business is “surrendered” during this process. If you don’t formally dissolve your corporation or LLC, you may be on the hook for fees, taxes, and other obligations, as you’ll still be in operation as far as the state is concerned.
If you don’t dissolve a business when you close down, your business technically still exists, even if it isn’t operating in any way or participating in any activity. At the federal level, you have to file what is known as a “final return” letting the IRS know that any business activity you were engaged in is completed. If you don’t do so, the IRS will be expecting an annual return, regardless of whether or not the business made any money or even operated in that year.
One of the most important reasons to formally dissolve your business is to avoid any issues with identity theft. Like any individual, a business has an identity that can be used fraudulently by a nefarious character to buy goods and property as well as entering into legal agreements. In some cases, a victim of this fraud can even personally sue you as the owner of the business. Additionally, your business can be sued or named as part of a lawsuit so long as it is in existence. This, however, is not possible if you simply dissolve your business before any potential issues occur.
Avoid Trouble Down the Road
Dissolving any non-operational businesses, you’ve owned in the past is also an important aspect of the estate-planning process. If you don’t dissolve the businesses yourself, there’s a good chance your heirs will have to do that in the future. This can become an issue if the original owner is deceased as many of the filings will be require information that may only be known to the original owner.
If you’re looking to dissolve your business, but feel overwhelmed by all the tasks involved, Traders Accounting can help you. Our experienced staff can help ensure that you have all your bases covered. Call 800-938-9513 to learn more about our services today!