DISSOLUTION AND GOING OUT OF BUSINESS
It is the unfortunate reality that 9 out of 10 businesses fail within the first five years. When that happens, what do you do? Just like when you were running your business, the decision to close, wind-up, or dissolve it must be considered and handled responsibly. Whether the reason for the dissolution of your business is voluntary or necessitated by financial or other pressures, the failure to do things the right way can create personal liabilities, lawsuits, liens and tax consequences.
The IRS requires a closing business to file an annual return for the year when the business is dissolved, just like it did when it was operating. The final tax return should carry an addendum stating the name, address, and other contact information for the keeper of the business’s records. The IRS notes that employers are required to file final employment tax returns in the event the company had employees. The IRS also recommends filing returns that cover the final disposition of property the business owned. The IRS further recommends that a dissolving business close that business’ IRS business account. This is a somewhat awkward procedure for disavowing the EIN associated with the closing business. The IRS never recycles an EIN nor does it reassign it to another business. Like taxes, an EIN is forever. In order to close your business account, and in so doing communicate to the IRS that anyone using this EIN thereafter is likely perpetrating a fraud, the IRS requires a written submission. Of course, the IRS will not permit you to close a business account if taxes or other payments are outstanding. Similar procedures are required by the Secretary of State for state taxes, depending on your business’s legal form.
This can become a complicated issue very quickly. But the winding down of the operations and closing of the books may create fiduciary duties towards creditors, shareholders and employees. Failure to pay final wages may result in personal liability. Taking property out of the business and not paying creditors may constitute a fraudulent transfer.
How can a business dissolution attorney facilitate my business goals?
The business attorneys of Bellatrix PC sit down with our clients to discuss your personal, financial, and legal concerns, at length, over dissolving or closing your business. By discussing your goals and concerns openly, we can not only open the lines of communication, but also establish a healthy attorney-client relationship. Drawing from this relationship, we are able to represent individual owners, groups of owners, or individual partners planning to dissolve a business.
Bellatrix PC handles the dissolution of family-owned businesses, partnerships, limited liability companies (LLCs), S-corporations, closely-held ventures, and other commercial entities. Our attorneys strive to provide an honest and objective perspective on the business dissolution process and your specific situation including potential areas of concern. In the lead-up to, and during, the dissolution process, we can address an array of issues including:
- Division of the business or the business’ assets & liabilities in a fair and equitable manner.
- Identify and resolve partnership disputes.
- Identify and explain all existing obligations and debts.
- Develop an actionable business dissolution plan
- Take steps to increase the likelihood of a smooth wind-up or transition so as to protect relationships with both clients and suppliers.
As in most business transactions, there are a broad array of facts, circumstances, and factors that must be accounted for. When you are trying to move on to your next endeavor, handling the various aspects of a business dissolution or closing can be overwhelming and lead to preventable, costly errors. Our firm can also work proactively as your business’s outsourced general counsel. If your business engages with our firm, you will know exactly where to turn for clear, reliable legal advice.
If you are contemplating dissolving or closing your business, contact Bellatrix PC or call us at (800) 449-8992 to schedule a confidential consultation.