Deciding to close a business, whatever the reason may be, is a significant event for any entrepreneur. Regardless of how ready, or not ready, you are to walk away from a business, however, there are a number of hurdles you will have to jump before you can completely close this chapter on your business journey.
How to Close Your Business
In order to close your Texas business, you will need to go through a formal termination process that is completed through the Texas Secretary of State. Completing the process in full is critical to avoiding hassle, complications, and continued liability exposure for you and the business. The process of closing your business will start internally with a vote among shareholders, members, or the board of directors, depending on your business’s structure. You may also need to submit the written consent to the closing from all shareholders to the Texas Secretary of State.
After getting approval to close your business, the next step is to notify creditors. This notice is required and must be in writing. It gives creditors an opportunity to bring any outstanding claims against your business so that they can be paid prior to the business’s termination. The notice should include a deadline for the submission of claims along with an address where claims can be sent.
You will also need to file a final tax return for your business with both Texas and the IRS. Any taxes owed must be paid before terminating the business. On the federal tax return, check the “Final Tax Return” checkbox to notify the IRS that the business will be closing and, therefore, no longer liable for taxation. You will also need to file two signed copies of your Certificate of Termination with the Texas Secretary of State. A Certificate of Good Standing, which you can get from the Texas Comptroller of Public Accounts must also be submitted with your Certificate of Termination.
Finally, you will need to cancel a number of things that are associated with your businesses. If you needed to obtain any special permits or licenses for your businesses, the relevant agencies or organizations for them should be notified of the business’s closing. Any outstanding contracts associated with your business must also be cancelled. After all outstanding taxes and liabilities for the business are paid off, the remaining business assets should be distributed to the business’s shareholders. Clients and employees of the business should also be provided with notice of the business’s closing.
As you can see, there are many steps you will need to take to close your business. It can be helpful to establish a timeline for your business closing in order to help ensure you get everything you need wrapped up in a timely manner. The timeline should account for things like giving creditors, clients, and employees notice of the closing. It should also account for anything like contractual obligations that may need to be addressed prior to closing.
Business Law Attorney
The Kumar Law Firm can help you effectively close your business so that you do not have to worry about outstanding liabilities and legal obligations. Contact us today.