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When you start a business, you should not think only about how to run it but also how to close it.  Statistics show that many businesses close shop after a year or two of operations.  The reasons could be financial, mismanagement, the economic crisis, etc.  Entrepreneur.com shares with its readers closing business tips from Deborah Sweeney, CEO of MyCorporation.com.  When closing a business, she advises business owners to file an annual tax return even if you were in business for only part of the year.  Make sure to check the box that says “final tax return”.  This also goes with your final employment tax return if you have employees.  Contact the IRS to close your employer identification number account.

There’s just no skirting the issue that for whatever reasons, sometimes companies must close up shop. It could be a lack of funding, bad business decisions, an economic crisis — or a combination of all of these.

Adding to financial woes, many doomed businesses fail to properly terminate their corporation or LLC, leading to a raft of unexpected charges associated with the dissolution of the company. There’s a right way and a wrong way to close up a business, according to Deborah Sweeney, CEO of MyCorporation.com. Here are her suggestions on properly closing a business:

1. File your final tax return.
When closing a business, you must file an annual tax return for the last year in business – even if you were in business for only a portion of that year. All corporation and LLC tax return documents, including Schedule K-1s, have a denotation that this is the “final tax return.” Check that box, and then contact the IRS to close your employer identification number (EIN) account.

2. File your final employment tax return.
Tax related matters also include filing a final employment tax return if you have (or had) employees. And don’t forget to make the final federal tax deposits for your employment tax return as well.

3. Deal with dissolution documents.
Unless you formally dissolve your business, the government will have it listed as an ongoing entity, accruing taxes and fees. Filing dissolution papers is especially important if you have partners or other owners in the business, as it prevents future confusion about ownership and liability.

4. Take stock of what you have and sell it.
Inventory and sell any assets that the business may have remaining, and be sure to report all business assets using IRS Form 8594 (the Asset Acquisition Statement). You might be able to recover some of your business losses by selling your inventory and equipment.

5. Cancel licenses, permits and insurance policies.
If you have city, town, county, state, or federal licenses for your business, contact the issuing authorities to cancel them. Also, be sure to contact your insurance broker to cancel business liability and workman’s compensation insurance, and notify your employee-based health care provider about the closure …

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