Obtaining a business license varies by state and in some areas it varies by city or county. In fact, even the types of business licenses that you’re required to get might vary based on your geographic location. The basic process of obtaining a license can be outlined in a simple three step process: research, submit your application with any required fees, and display your business license. 

Business licenses can cost between $10 and $500 or more, depending on the type of license you need and where your business is located. A simple business registration license is typically a way for states to know who is operating within the state while more serious licenses, like a liquor license, is a way for states to regulate potentially dangerous substances. 

Before you can apply for a business license in most states, you’ll need to legally register your business with the state. This means preparing and filing all of your LLC or corporation documents and making sure the state files the documents. MyCompanyWorks can complete this process for you in just three easy steps. Get started today by filling out a simple online form. 

Obtaining a Business License in 3 Steps

There isn’t a one size fits all process for obtaining a business license. The process will always depend on the type of license you’re applying for and where you live. However, we’ve outlined a basic process that can be followed to first understand what your requirements are and second to complete all needed application materials. For the purposes of this process we’re going to assume that you need a basic local business operations license. 

Step 1: Research Your State, County, & City Requirements

The first step in the process is to research whether you need a business license or not. Most businesses that need to obtain a business license will have physical locations within the city or county. Typically this is defined as an establishment that local citizens can walk into. Some home-based businesses are also typically required to obtain a license. The types of home-based businesses that generally need to get a license include: 

• In-home childcare or preschool
• Any business that has clients or customers physically coming to the home
• Any business that is required to obtain a license by a government entity based on the industry the business exists within

All business owners should consult with both the state government and the local government to determine all business license requirements. The last thing you want is to get your business shut down after you’ve opened your doors because of a failure to obtain the proper licenses. 

For a basic business license, most states will either set the rules or allow the local government to set them. In most situations you won’t have to pay fees and register with both legal entities just to open your doors. However, as more license needs occur you could be working with multiple layers of government or multiple agencies at the state government level. 

For example, a local bar may be required to obtain a normal business license from the city the bar is located in but will also be required to obtain a liquor license directly from the state. This is pretty standard and you should plan for anywhere between a few days and one month to obtain a business license, depending on the type of license you need. Some states may take even longer to process applications for potentially dangerous licenses, like a liquor license. 

Step 2: Complete Application Requirements & Submit All Fees

As soon as you know what the requirements are for your state you need to collect all required information and fill out all application forms. Keep in mind that if your business has multiple physical locations then you may end up having to complete the license paperwork once for each location, especially if they are in different cities or counties. 

Once you’ve completed the paperwork you should have a professional look it over to make sure you’ve done it correctly, or at least someone who can provide a second pair of eyes. If you’ve put the right signatures on the documents and have included all requirements then you should now submit the documentation with any required fees. 

Some states will require you to fill out the paperwork and bring it into a local office while others will let you mail in the paperwork or even fill out all of the documentation online. Regardless of the method each state allows you to submit the paperwork, you’ll likely get your license in the mail within a certain period of time. 

Step 3: Receive Your License & Display it in Your Business

Once the state or local government is satisfied with your paperwork they will process your application and deposit your fee money. The officials will then, finally, print your business license and send it to you. You need to read over any information that is given to you very carefully when you receive your license. 

Many states will require you to properly display your business license for all of your customers to see. There could be very specific rules with how or where you need to display the license. For example, you may have to display it within typical eye-level of your customers and within ten feet of the front door, or right behind your main check-out area. Regardless of the rules, it’s important that you follow them to the letter of the law or your license could quickly be revoked. 

Types of Business Licenses

While most businesses will need a general operating license, there are many different types of business licenses that you might need to successfully operate your endeavor. The types of different licenses you need will depend on what industry your business is in and on what you sell. The types of business licenses you might need include: 

• Local Operating License: This is the type of business license we discuss above, and the most common license businesses apply for.
  
• Building Permits: You may be required to get a permit, or license, for any remodeling work that might be needed within your business’s location.
  
• Zoning Permit: The local government will need to approve your use of the land you’re operating on for the specific type of business you’re operating. For example, if you’re in a retail zone and want to open a manufacturing operation then it may take some convincing of local politicians.
  
• Fire Department Permit: This permit is essentially passing a test by local officials that says your building is structurally sound and you’re given a maximum occupancy that is safe in the event of an emergency.
  
• Health License: These are typically needed by restaurants or food establishments.
  
• Sign Permits: You’ll likely need to get approval of the city for any exterior signs in terms of size and possibly color or other specific decor.
  
• License to Serve Alcohol: You’ll need a license to serve alcohol that will be consumed at your business and a separate license if you’re going to be selling alcohol that isn’t consumed there.
  
• Seller’s License: You may be required to get a specific license, depending on the types of goods that you’re selling to consumers.
  
• Occupational License: If you’re a business professional then you’ll be required to register as one and make sure you’re properly licensed before opening your doors.

In addition to all of the permits and licenses above, you may be required to apply for some business licenses that are regulated by the federal government. If you’re in certain industries then you should make sure there are no federal licenses that you must obtain. These industries include: 

• Aviation
• Mining or drilling
• Public transportation
• Logistics (including maritime)
• Agriculture
• Fish and wildlife
• Nuclear energy
• Broadcasting 
• Firearms or explosives

The key to covering your business properly is to make sure that you’ve exhausted the levels of government to make sure you’re obtaining all the licenses your business needs. You can either hire a professional attorney to help you through the process or you can reach out and communicate with your local government officials to get specific requirements. 

Get Started Today

Before you complete your business license research you should make sure your business paperwork has been completed with the state. This means starting your LLC and filing all appropriate documentation. MyCompanyWorks will complete all of your required documentation and submit it to the state where you business exists for you. You can get the process started today by filling out a quick online form. 

In addition, we offer a Business License Compliance Package that does all of the tedious research for you and gives you all the forms and instructions in one simple online dashboard to complete and submit to the proper authorities.

Corporate bylaws are the legal rules a corporation is operated by after the business if formed. Once the organization has a legal entity that has been filed with its state, the board of directors will typically decide on the bylaws which the company will live by going forward. Some examples of bylaws include listing a registered agent and defining the classes of stock for company ownership. To see what bylaws look like, you can see Microsoft’s at this link.

One of the main reasons LLCs became so popular for small businesses is that bylaws and other corporation complexities are not required. Instead, the business creates an operating agreement at the time the legal entity is formed. Many states don’t even require an operating agreement for an LLC to be formed and start operating. If you’re interested in forming an LLC you can learn more about your state’s requirements by checking out are State Startup Guides.

Why You Need Corporate Bylaws

Bylaws help ensure that your corporation runs smoothly. These rules outline the internal rules of your business, from a legal standpoint. The bylaws outline how decisions are legally made, who gets to vote, and the structure of how it works. If your business is very large, or you plan for it to be, then this will be helpful to make sure there’s organization to the chaos of both making big decisions and having a large ownership structure. 

The bylaws are important for all corporations to have, especially if you end up becoming a publicly traded one. This is because the bylaws outline how the official books are to be kept and what the reporting timeline looks like. Anyone wanting to invest in your business will want strict rules around how they’ll be able to keep up to date with what’s happening inside the organization’s performance. 

The bylaws also outline how the stock of the company is going to be divided up. It’s important for any business that plans to sell stock or take on investment money in the future to have a strategy behind the various classes of stock and how those stocks are transferred between owners. There also needs to be set rules around qualifying stockholders and knowing exactly who has a right to make business decisions and who doesn’t. 

However, the main reason you’ll create bylaws when you’re still a smaller company is because it’s required for all corporations to do so. What many small business owners don’t know is that you can start out as an LLC, which has more relaxed rules, and then as you start to grow you can switch to a corporation later. If you’re unsure of what the success of your business might be then this might be your best bet. 

Note: As of the date of publication, the only states that require your LLC to create an operating agreement are Delaware, New York, Maine, California, and Missouri. 

Example of the Benefits of Bylaws

All states have rules around how businesses are meant to operate and interact. If you’re not required to create bylaws, or an operating agreement for LLCs, you might still want to in order to counteract some rules in your state.

For example, some states might have a default rule that all profits are evenly distributed or that the legal responsibility for a company’s actions is evenly distributed among shareholders. In many cases you can actually get around these rules by having very strict bylaws that says the profits or legal responsibility is broken down much differently than the state’s rule. 

How Corporate Bylaws Work

Bylaws are pretty straightforward, like most legal contracts. The bylaws are not registered with your other incorporation documents that you provide to your state, but they can be equally important to operating your business. While you don’t legally file the bylaws with your state, it doesn’t make them any less enforceable. The bylaws are binding as soon as a majority of the board of directors votes them into action. 

The size of your corporation’s bylaws will heavily depend on the size of your business. You may want more relaxed bylaws early on and then you may want to enact more strict rules right before you take the company public. Things like the number of directors the business has will also have a necessity to change as time goes on and you grow in both revenue and employee count. 

Typically whatever the bylaws say is the law for your business. Legal entities typically have the right to operate internally in anyway that the majority of shareholders agree to. This means that while you’re legally bound to your bylaws, you have a lot of flexibility in how you can setup your business to operate the way you need. 

How Corporate Bylaws are Created

The creation of bylaws is simple from a legal standpoint. All you have to do is draft them and get a majority of the board of directors to vote “yes” on enacting the document. There aren’t a lot of rules that restrict you on the actual creation of your bylaws in terms of what can be included in them, but there are many common things that you should include to make the legal operation of your business clear and concise. 

Common Corporate Bylaws

Some of the most common corporate bylaws include:

• Your Business Management Structure: How many Directors will your business have? Who has the legal authority to make binding decisions for the business? Who is ultimately responsible for legal or tax filings and who is the contact person or group for your business?
  
• Your Business’s Registered Agent: If your business is going to receive legal notices or documents in the future then they will be sent to your registered agent. It’s important to keep this part of your bylaws up to date so that you don’t miss an important legal notice. Whomever you have in your official bylaws is the only person or group that has to be contacted for notice to be given to you.
  
• Classes of Stock: How much stock do you have in the business initially, what classes are there, and what are the rights and privileges of those classes? This is extremely important if you’re bringing on outside capital or going public.
  
• Voting Rights: This should be called out specifically so it is clear who has the legal opportunity to weigh in on big business decisions, like taking on outside capital or selling the business.
  
• How the Business Can Be Dissolved: This is important to include so that the only ways to dissolve the business are clear to everyone, regardless of any state statutes.
  
• Corporate Meeting Information: How often do the directors meet and what is the purpose of those meetings? Are these meetings the only time that big decisions can be made and if so, can the board of directors call a special meeting to vote on something important? How do you give notice of meetings to directors? These are all important things to spell out so that there is no internal legal dispute amongst shareholders.
  
• Dividends: If the shareholders have a right to dividends then it should be spelled out in the bylaws on when they might receive one and how it would be dispersed.
  
• Amendments: Any specificity you can provide on how amendments to the bylaws are enacted in the future will be important to make sure it’s clear how things can adapt and change over time. 

This list isn’t all-inclusive for every business. If you need complex bylaws, you should partner with a lawyer that is experienced in setting up businesses and enacting bylaws for many different types of businesses. 

Does My Business Need Corporate Bylaws? 

The real answer to whether or not your business needs bylaws is that it really depends. If you’re starting a corporation then you’ll need to draft a set of bylaws. However, if you’re a smaller business or unsure of what direction you want to take your new business, then you may benefit from starting out as an LLC, which means you won’t need corporate bylaws. We do recommend that you still craft an operating agreement, even if it’s not required in your state, especially if your business has more than one owner. 

Getting Started With Corporate Bylaws

Whether you’re getting started with your corporation and need to enact specific bylaws for your business, or you instead want your legal entity to be an LLC, we can help. My Company Works has completed over 60,000 legal business formations and our packages include an Operating Agreement (for LLCs) and Bylaws (for a corporation).

Transferring real property, or other assets, into an LLC or corporation can help you protect yourself from personal liability. This is typically done with property you anticipate having another party involved with in some way, such as a rental property. Transferring property can help protect you from personal legal liability.

The process for transferring property to your LLC is similar to selling your property to a another party. You’ll just need to completely transfer ownership to the corporation instead of an individual, like in the event of a sale. It’s a simple three step process that we detail below.

Step 1: Form an LLC or Corporation

You can’t transfer your real estate property, or any other personal property, into your LLC or corporation until you’ve actually formed a new legal entity. This can be a complicated process if you’re not familiar with the proper documentation or if you’re not up to speed with your state’s rules and regulations. Typically you’ll need to register a business name and file the LLC or corporation paperwork with your secretary of state’s office.

NOTE: For the remainder of this article, when we refer to an LLC, the same concept applies to a corporation.

If you haven’t completed this process before then you’ll want someone familiar with the formation documents involved, especially if you have any partners or other members of your LLC. You don’t want to lose any of your own rights to the property because you weren’t sure how to structure the LLC or what basic clauses you needed in your partnership paperwork.

Using an experienced company,like ours that has completed 60,000+ business formations, is important to make sure you’re completing the LLC formation process correctly. Getting an LLC formed and filed isn’t necessarily difficult but it does require a certain level of expertise to make sure nothing is missed that could hurt you or your business later.

Step 2: Complete a Quitclaim Deed

At this point you may want to consult with an attorney to make sure you complete the right deed for your personal property transfer. If you’re transferring real property than most of the time you’ll want a quitclaim deed that shows this transfer of ownership. When executed, a quitclaim deed transfers any interest the grantor has in the property to a grantee. In this case, you will be the grantor and your LLC or corporation will be the grantee.

There may be certain laws surrounding compensation for the transfer in your state, which is another reason you may want to consult an attorney. The laws would be what compensation is required when transferring property from one party to another. There also could be a transfer tax, depending on your state, if there is no compensation paid from the LLC for the property.

Step 3: Record Your Quitclaim Deed

In order to receive full legal protection for your personal assets when you transfer the property to your LLC you’ll need to record the deed at your local city or county clerk’s office. This recording creates a public record of the property transferring from you to the LLC, so the world is put on notice that you no longer own it and can’t be held responsible for anything that happens with it.

Recording the deed requires either going down to your local clerk’s office or mailing the paperwork, depending on the rules of your state, and then paying a nominal fee. This is an important step that must be done because otherwise there is no notice to third-parties that may have a legal dispute with the owner of the property in the future, which is a legal requirement to pass legal liability to a new owner.

Other Steps to Take When Transferring Property to Your LLC or Corporation

While the required steps to transfer property to an LLC don’t make for a long list, there may be more things you need to consider and take care of that depend on your situation. Not every single person looking to transfer property to a legal entity will need to complete these tasks, but they should be understood to make sure they aren’t a necessary step for your process.

Additional steps you should keep in mind if you decide to transfer personal assets to an LLC include:

1. Change Any Property Leases: If your property is being rented out, and you’re already under contract with a tenant, then you need to make sure you change all legal documents and leases to note who now owns the property (the LLC). In fact, you may want to just get brand new leases signed that are in the name of your LLC instead of yourself.
   
   
2. Notify Your Lender: If you have a mortgage on the property then it is likely that you have some language in your agreement that stipulates a requirement of you notifying them when ownership changes. This could cause a rate increase, but you always want to make sure you’re being compliant with previous agreements.
   
   
3. Obtain a Tax ID Number: You may not have to obtain a tax id number, but chances are that if you’re wanting to move property into an LLC then you’re likely doing something that requires this to happen. If your LLC has more than one owner, if you have employees, or if you meet other requirements that vary by state then you’ll need to get this tax ID number when you create your LLC.
   
   
4. Open a Business Bank Account: Opening a business bank account will help you further separate your personal assets from the assets in your LLC. If you move personal assets into an LLC to protect yourself legally then you won’t want to put that at risk by mingling your personal and business funds into a single account. Instead, open a business bank account to keep it all separate and keep your other personal assets safe from anything that happens with the LLC.

Pros & Cons of Moving Property Into an LLC

There are things you need to keep in mind when you decide to transfer personal assets to an LLC. For example, your actions may result in certain tax consequences, which we’ll summarize below. While the legal protections are nice, it’s also important to note that you may end up hurting yourself financially if you decide to transfer a property you currently have a mortgage on. We detail the most important pros and cons of transferring personal property into an LLC below.

Pros of Moving Property Into an LLC

The pros for moving property into an LLC include:

• Personal Liability Protection: If you’re dealing with another party with your property, like having a renter, then it makes a lot of sense to use an LLC or corporation to shield your personal assets from anything that may happen with the property. This way if there is a lawsuit later over an event on the property, like an accident, then no one will hopefully be able to come after your personal assets, like your personal home, for damages.
  
  
• Protect Your Property From Your Property: If you have multiple properties that you’re renting out then it is a benefit to keep each one in a separate LLC or corporation in order to shield each one from potential liability of the others.
  
  
• Tas Advantages: There can be certain tax advantages to owning real property in an LLC and running any money making activities with that property as a business. This is something you should consult a CPA on to determine what could be the most beneficial to you.
  
  
• Better Defines Partnerships: If the property you’re moving is jointly owned by more than just yourself, then moving it to a multi-member LLC or corporation is beneficial. Not only can there be tax benefits this way but it also clearly defines the ownership and management responsibilities within the legal entity. This makes your partnership much more clean and easy to navigate, especially if anything goes south later.

Cons of Moving Property Into an LLC

The cons of moving property into an LLC include:

• Tax Consequences: While there can be certain tax benefits, there can also be certain tax consequences of moving property. You may incur a delayed tax consequence or if multiple people own the property then you could trigger a tax event for someone else. Make sure you speak with a CPA to fully understand how this could help or hurt you from a tax standpoint, and consult with any partners to make sure it works for them.
  
  
• Mortgage Rates Could Increase: Many owners of rental property will get a good rate on their mortgage by purchasing the property as an individual. If you later transfer the ownership over to a business, then you would likely no longer qualify for the much lower rates your lending institution gives to individuals. You probably have a legal obligation to share this transfer to your lender, but when they find out it could cost you a lot of money by your rate being increased.
  
  
• Insurance Costs Could Rise: One thing that many people don’t consider when transferring property to an LLC or corporation is insurance. If the ownership of your property changes to a business then your insurance carrier could make you change any current personal insurance policy to a commercial policy. These commercial policies typically have much higher premiums, because of the nature of businesses to litigate more frequently than individuals.

Getting Started

As we mentioned above, the first step to transferring property to an LLC or Corporation is to register your LLC or corporation. You can do this today by letting us help. It’s a simple three step process where you select your company type and state, you fill out a simple online form, and we send you back all of your paperwork. Get started today so you can realize the legal protection of an LLC with your property!

Tax deadlines for 2018 are quickly approaching (some are due in just 14 days from publication of this post!) so here’s what you need to know to file your LLC or Corporation (or S-Corporation) taxes and some services that can make it easy for you to get done fast.

Who Needs to File

Anyone who owns part of any US business must file a Federal tax return regardless if you are a US citizen or had any revenue. Even if you didn’t do any business you still must file an “all zero” tax return. See below for assistance.

Tax Forms and Deadlines by Business Entity Type

• 1-Member LLC
  • IRS Forms to File: 1040 with Schedule C (Instructions)
  • Due Date: April 15
  • Non-US Citizens: 1-Member LLCs that are owned by a non-US citizen must file Form 5472 and a “pro forma” Form 1120 (Only indicating the name and address of the foreign-owned LLC, its employer identification number and the date of formation). In addition, non-US citizens are required to file Form 1040-NR (or Form 1040-NR-EZ).
• 2+ Member LLC
  • IRS Forms to File: 1040 with Form 1065 (Instructions)
  • Due Date: March 15* for form 1065
  • Non-US Citizens: Form 1040-NR (or Form 1040-NR-EZ).
• Corporation
  • IRS Form to File: 1120 (Instructions)
  • Due Date: April 15* for form 1120
  • Non-US Citizens: In addition to Form 1120, C-Corporations that are owned 25% or more by non-US citizens must also file Form 5472. Finally, non-US citizens are required to file Form 1040-NR (or Form 1040-NR-EZ).
• S-Corporation (or LLC taxed as an S-Corporation)
  • IRS Form to File: 1120S (Instructions)
  • Due Date: March 15*

* or the 15th day of the 3rd month after your fiscal year ends. The vast majority of S-Corporations and Partnerships have a fiscal year that ends on December 31 (you would have had to indicate a different year when obtaining your FEIN to specify anything else).

Recommended Services

• TurboTax Business – Just like regular TurboTax for your personal 1040 tax return, this service will help you self-file Schedule C (simple), Form 1120 or 1120S for your business. Definitely simpler than doing yourself but requires a fairly good grasp of business taxes for the form 1120 and 1120S. We recommend this option for clients that are familiar with business taxes or have a new company and only a few transactions.
• Greenback Business Services – This service will have a professional accountant file Corporation or LLC taxes (and 1 state form, if applicable) and have lower-cost options based on your annual revenue starting under $500. Note that they can also file your personal tax returns as well. MyCompanyWorks customers receive an automatic discount of $75 when purchasing a return.
• 1-800-Accountant – They provide tax, accounting, bookkeeping and payroll service for those who prefer a “full-service” solution.

Other Resources

• MyCompanyWorks Business Tax Guide – goes into more details about the taxes above, non-citizen taxation, state taxes, sales taxes, annual reports and basically everything you need to keep  your company compliant.

One of the most daunting aspects of doing business as an entrepreneur is coming to the realization that your business is failing and needing to decide whether to salvage or close it for good. Business owners must often review their operations to determine how sustainable the business is. When the business is no longer profitable due to a poor economic situation, strong competition or other factors, it is essential that a business owner knows how to close a business the right way.

The dissolution of a business involves a step-by-step process. Knowing how to close a company will save you from any potential lawsuit, loss of business and personal reputations, and excessive charges. Whether it is an LLC or a corporation or a sole proprietorship, this checklist will guide you all the way through the dissolution of your business.

How to Close a Corporation or LLC

Step 1: Think and decide.

Before arriving at the decision to close your company, it is essential to assess the debt obligations and financial strengths of your business.

Review your current situation. Is there any expenditure that you can eliminate to improve your company’s profitability? Check if there is anything you can do to negotiate the lease, reduce the payroll costs or perhaps lower overhead expenses by finding more cost-friendly vendors. By reducing expenditures, you will also have the opportunity to stay in business or even make your business more salable.

Seek expert advice or do research on the internet. Before finalizing your decision to close your business, speak with an attorney, an accountant or other business advisor. Let your accountant review all financial aspects of your company and the possibility of preventing business failure. If closing your business is the last recourse, an attorney can guide you in complying with all legal requirements.

Step 2: Review all documents.

Whether you are a corporation, an LLC or a sole proprietor, you need to review all documents relevant to your business, including articles of organization, bylaws, and other agreements to determine your next step.

LLCs likely require a member’s approval for dissolution according to the operating agreement. Typically, if the majority supports the decision to close the business, then everyone can push through with the process including settling all accounts, paying all employees and filing the necessary paperwork. It is crucial to know the state laws of the state in which your business is incorporated or registered.

Corporations may also need the votes of its shareholders to dissolve the business. The business documents of a corporation will determine the procedures required for closure.

Finally, once you are sure about closing your business, start contacting your creditors and notify them of your plan. This enables your creditors to compute all outstanding debts. Before selling your company’s assets, discuss your liquidation plans with your creditor and talk about how you want to settle your debts.

Step 3: LLC or Corporation Action

Whether it is a limited liability company (LLC) or a corporation, company owners should approve the business dissolution. With a corporation, the shareholders should accept the decision. If you are wondering how to dissolve an LLC, it is important to have the approval of the members. For small businesses, members or shareholders typically take part in the daily operations and usually are aware of what takes place every day.

The corporation’s bylaws and the operating agreement of LLC outline the needed approvals and the dissolution process. Complying with formalities means that the board of directors should create a draft and render approval of the resolution to dissolve. Following this, the shareholders vote on the resolution approved by the director. These actions are documented and kept in the company record book.

Step 4 File dissolution documents.

After the members or shareholders vote for the dissolution, documents should be filed with the state where the business was registered or incorporated. The dissolution of a company starts with the filing of Certificate of Dissolution, also referred to as the Articles of Dissolution, depending on the state.

Some states require the filing of documents before letting the creditors know or before resolving claims. Other states require your company’s tax clearance before filing the Articles of Dissolution. In this case, the company or LLC has to pay the back taxes first.

Step 5: Cancel licenses, permits, and registrations associated to the business and settle your employees’ wages.

Is your business leasing a space? If so, then you will need to notify your landlord of the termination of your lease. Your landlord may require you to either pay the whole amount of the lease or he or she will find a replacement for your space. This is known as mitigating damages. You would be accountable for the leasing fee from the time your contract is terminated until the time a new tenant leases your space. There are times when landlords allow the payment of termination fee, particularly when the location is on high demand.

Settle what you owe to your employees, including any unused vacation leave and wages. Issue a final paycheck to your employees within a specific period. The US Department of Labor offers links to certain state agencies for you to determine whether your state requires you to pay the unused vacation time of your employees. Depending on how big or small your business is, you will be required to notify employees before closing down the business for good.

Part of closing down your company is filing the payroll taxes. Submit your employees’ withheld taxes to the federal and state government within the allotted time. If you fail to comply with these tax requirements, you may be subject to pay a penalty fee and the government has the power to seize your assets to collect the amount owed.

File all the required federal and state tax information. Consult the checklist that the IRS uses for closing a business to make sure that you meet all tax obligations. Talk to your accountant and determine which taxes to pay.

Step 6: Collect the money owed to your business.

Once you have chosen to close your business, collect the money owed to your company so that you can pay off creditors. Consider calling the debtors to politely request the remittance of their payment. Offer a discount as an incentive for the debtor to settle what they owe to your business immediately.

Attempt to collect debts before announcing your business closure. A debtor may attempt to hold out on settling the debt if he or she has the idea that the business is closing. If you have accounts receivable, sell them to a company that purchases account receivables. Such companies will purchase your debt at a lower value and pursue the collection of the debts aggressively for their own profit. Although you will not obtain the full amount of your account receivables, you no longer need to collect any debt and will obtain access to funds quickly.

If you have any outstanding orders, fulfill them. If you are under contract to offer certain products or services, fulfill them or negotiate. It is essential to discuss matters with your clients concerning their outstanding orders and resolve such matters. If you fail to reach an agreement or compromise, you can be held accountable for breach of contract.

If you have assets or business inventory, sell them. It is important to perform a complete inventory of your assets and start selling them. Offer discounts when necessary to move the products at a greater pace. Consider selling your assets at auction. Holding an auction enables you to sell the inventory quickly without added shipping costs. You may also consider selling them to a consignment store. These types of businesses accept goods and sell them. After selling the good, they will give you part of the sale. Consider selling your smaller assets online. Large items will have higher shipping costs.

Step 7: Settling the claims of creditors.

Creditor claims can either be rejected or accepted by your business. Accepted claims should be settled through payment unless satisfactory arrangements are made with creditors for reimbursement. For instance, a creditor may consent to resolve the claim for 80% of the original amount. With rejected claims creditors should be informed in writing that your business rejects their claims. In this case, the assistance of an attorney is needed.

Step 8: Distribution of remaining assets

After paying off the claims, whatever remains of your assets should be distributed to all business owners in proportion to the ownership share. For instance, if 80% of the business belong to you and your partner has the 20% share, you obtain 80% of whatever remains of the assets. Distributions should be reported to the IRS. If the business has various stock classes, corporate bylaws generally summarize the procedure for distribution of assets to these shareholders.

How to Close a Sole Proprietorship Business

A sole proprietorship is a business owned by only one person and without partners. This means that the owner is legally accountable for all decisions concerning the operation or termination of a business. To close a sole proprietorship, below are the step-by-step processes.

Step 1: Inform all employees.

If your business has employees, inform them of your plan to close the business. A company that has roughly 100 employees has the responsibility to give its employees a 60-day written notice before the closing.

Step 2: Notify your clients and vendors.

Send notifications to your clients and vendors of your plan to close your business. Arrange project completion, payment for invoices and fulfillment of any outstanding contracts. Notify them of the final date of business, the final date of services and provide them with copies of any agreements.

Step 3: Cancel all licenses and sales tax identification number.

When closing your company, you should also cancel your sales tax identification number and any business licenses. Do this through the business licensing department of the state where your business is located.

Step 4: Tax work.

File the final tax paperwork. The complexity of filing relies on the scope and size of your sole proprietorship. Report all income including losses and capital gains.