There are several reasons a business owner may need to dissolve their business, but they may not know how to go about it. There are financial, legal and operational items to consider.
Reasons for dissolution
Businesses commonly decide to dissolve due to financial challenges, including an inability to pay their debt. If they face increased business expenses or are unable to pay their employees, it may be in their best interest to close.
Also, sometimes the business faces difficulties because technology changes or their services are no longer relevant in the marketplace. Business owners may also choose to dissolve the company for personal reasons like retirement or to move on to a new opportunity.
The dissolution process may vary depending on the business type, but there are general steps that are helpful to understand. First, the business owner and any shareholders should formally document the decision to dissolve the business.
They will need to notify tax authorities, including the Internal Revenue Service and the New York State Department of Taxation and Finance as well as pay any outstanding taxes. Then, they can file the dissolution documents with the state.
If the business owes any debts, those must also be settled before the business can close. They must close bank accounts, cancel any licenses or permits and notify their creditors. If the business has employees, it will also need to issue final paychecks.
After any remaining assets are distributed, it can then close its buildings or online stores. It’s important that this process is completed correctly.