Around half of all small business enterprises close by their 5th anniversary. Business dissolution can be due to many reasons, including economic hardships and administrative issues. Yet, closing a business in Tucson, Arizona can be legally complex. While you may have moved to other things after business failure, it is critical that you formally close your business.
You may need to navigate legal issues, including filing tax returns, settling debt, and protecting your property from auctioneers. To avoid future liabilities, it is important to follow legal procedures when dissolving your business. While there are many resources on business dissolution, it is advisable to seek the help of a business lawyer when closing your business.
Understanding Business Dissolution
Like opening a business, the process of closing a business depends on your business structure. For instance, how you close a sole proprietorship is different from how you close a partnership or a corporation.
When opening your business, you use documents like articles of organization and incorporation, depending on the business structure. Likewise, you need to file articles of dissolution with the state to formally dissolve your business.
Failure to file articles of dissolution after closing your company can make the state assume you are still in operation. The state will thus be expecting you to file necessary reports, and pay taxes. The state will penalize you for failing to comply with these requirements.
Preliminary Steps Before Dissolution
There are some things you need to do before filing the articles of dissolution, including reviewing your business agreements. You should also have a formal vote on the business dissolution, especially for corporations.
You also need to notify the business stakeholders, including employees, clients, and creditors. The notice to creditors also notifies them of the claim submission deadline.
Steps of Business Dissolution in Arizona
After the preliminary actions, here are the steps to take to formally close your business.
- File Final Returns/Articles of Dissolution
The type of documents or returns you must file when closing a business depends on the type or structure of your business. For instance, you need to file articles of termination with the Arizona Corporation Commission when closing a corporation or an LLC. If the company also has operations in other states, you must also file the necessary paperwork in those states.
- Pay Taxes and File Final Tax Returns
Your business is liable for any taxes for the previous and current year. You need to pay any outstanding taxes, including employment taxes, before closing the business. You must also file all your annual federal, state, and local tax returns. The filing process, including which forms you need to file, may be different depending on the type of business you run.
- Settle Other Financial Obligations
The next step involves settling all the other financial obligations, including debts. By this time, you’ve already notified your creditors about the business dissolution. It’s time to clear the debts. You can arrange with your creditors a repayment plan for outstanding debt. Likewise, collect any monies owed to the business. After settling your debts, sell and distribute your business assets.
- Cancel Business Permits, Registration and Licenses
After confirming that you have no outstanding taxes or fees, you can cancel your business permits, licenses, and registrations. The process involves applying for the cancellation of your employer identification number (EIN) and closing your IRS business account with the Internal Revenue Service (IRS). The cancellation process, including canceling state and local permits and licenses can be lengthy and complex. It is advisable to seek the help of an experienced business dissolution attorney.
- Keep Your Records
Even after formally closing your business, you need to keep business records. For instance, the IRS requires you to keep employment tax records, and property tax records for some years after the closure of your business. While there are different requirements for specific records, financial experts recommend keeping all business records for seven years.
- Other Post-Dissolution Considerations
You must also keep your business bank account active until the completion of all financial transactions. However, if you have paid everyone, you can close the bank account and any other financial accounts and distribute the remaining funds among the company owners. You can also terminate leases, service agreements, and contracts after finalizing the business dissolution process.
Work With a Tucson Business Dissolution Attorney
Formally closing a business, including filing articles of termination or dissolution protects you from future liabilities. You may have moved to other things and these activities may feel like unnecessary chores. But, notifying and paying your creditors, paying taxes, and filing tax returns with taxing authorities are critical actions when closing a business. Typically, closing a business involves navigating complex legal requirements.
However, a skilled business law attorney can help you navigate the process and protect you from future liabilities. If you are in Tucson, AZ, contact our skilled and experienced business dissolution lawyers at St. Clair Law. Regardless of the type of your business, we will help you formally dissolve it, including helping you navigate the often legally complex process. Contact us today for a consultation and to more about our services.
