Necessary Steps to Shut Down Your Company
Times have gotten pretty rough for my small truck company, it’s a limited liability company (LLC). My wife and I will have to shut it down. Is there anything we have to do to get this done right so we can protect ourselves?
So sorry to hear about your tough times but yes there are several things you need to do to shut down a corporation such as your LLC. There are always things the Internal Revenue Service and your Secretary of State will require to properly shut down your business, which is called dissolution in legal terms.
First you need to look at your Articles of Incorporation or your state laws and follow that process to dissolve your company. Usually this requires a majority or even a two-thirds vote of the shareholders in order to dissolve the corporation. You should follow these requirements completely and exactly to prevent any disputes later.
Second, you need to file your Certificate of Dissolution with your Secretary of State which informs the public of your decision to end your business. This also gives any creditors notice the company can no longer incur any further business debt as well as relieve the company of future tax burdens, but not past or current taxes. If you do business in other states, then you also have to give notice to those states.
Filing a Certificate of Dissolution, also known as Articles of Dissolution is some states, differs from state to state. Some states require you to file the Dissolution before you notify your creditors and others require you to notify creditors first, therefore you need to check with your state to see which they require. Every state requires you resolve the creditors’ claims be resolved some way, such as paying in full, paying an agreed amount in compromise with them or as a last result bankruptcy of the company.
Corporations are required to inform creditors the company has been or intends to dissolve, a mailing address where they may send their final claims for payment, and a deadline to submit their claims. The deadline is usually 120 days from the date of the notice to the creditor in most states.
You will also need to collect any monies owed to your business. Unless your state laws require you tell them you are closing, then it is best not to tell them. Try to collect as much as soon as possible since it may be harder to collect for a company that does not exist anymore.
Of course you will need to let your employees know, your clients as well as your landlord know, if you have one. Most lease agreements have language covering this situation and you may be required to finish paying the lease each month until it expires unless you declare bankruptcy. The landlord has a duty to mitigate their damages from your company closing so they are required to search for a new tenant in good faith to take over the lease or execute a new lease.
Some states require you to clear all back taxes before you can dissolve. You can accomplish this by getting a tax clearance letter from the state tax agency showing your business is current on its taxes.
The corporation is still liable for any past and current taxes; including payroll taxes, quarterly and annual taxes, capital gains taxes and any other tax your jurisdiction may require. You will be responsible for all final Federal and State tax forms that must be tiled; such as income tax, sales tax that has been collected, payroll taxes, and unemployment tax.
The IRS is real funny about payroll taxes because you withhold those taxes from your employees. Should you fail to pay those payroll taxes, then the IRS will hold the owners of the business personally liable for any unpaid payroll taxes. Yes, that means the IRS can go after your personal assets such as your cars and real estate to collect the unpaid payroll taxes. You must also issue final wage and withholding information to employees, report information from W-2 issued to employees, report any capital gains or losses, file final employee pension/benefit plans, report information from Form 1099 issued and report the sale or exchange of property used in your business.
You will also need to terminate any business licenses or permits you have. Canceling these the will prevent others from using your business account or name to run a business and leave you holding the bag for their taxes or penalties. This is a type of identity theft so it is very import to cancel everything.
After you have paid all your taxes and creditors you owe, then any assets left over you can sell; this includes equipment, stocks, trademarks and goodwill. The money from any sale is to be distributed in strict proportion to the owners of the business. If you own 70% of the business, then you get 70% of the sales price of the remaining assets. Selling of the remaining assets of your business demands you do a good job of documenting the sales in order to protect yourself from other owners and of course the tax man.
Shutting down your business is never easy or fun. It took a lot of your time, money and hard work, but making sure you shut it down properly is crucial. Of course I do also recommend you consult a CPA, tax advisor or attorney in order to protect yourself from your state and local tax agencies.
Jim C. Klepper is President of Interstate Trucker Ltd., a law firm entirely dedicated
to legal defense of the nation's commercial drivers. Interstate Trucker represents
truck drivers throughout the forty-eight (48) states on both moving and non-moving
violations. Jim is also president of Drivers Legal Plan, which allows member drivers
access to his firm’s services at greatly discounted rates. Jim, a former prosecutor,
is also a registered pharmacist, with considerable experience in alcohol and drug
related cases. He is a lawyer that has focused on transportation law and the trucking
industry in particular. He works to answer your legal questions about trucking and
life over-the-road and has his Commercial Drivers License.
800-333-DRIVE (3748) or www.interstatetrucker.com