The closing process of an S corporation includes a number of steps that involve shareholders, owners, vendors and employees. A variety of tax obligations must be met and all aspects of business operations officially ceased and dissolved to ensure the company holds no future liability. Consider consulting a legal or accounting professional to assist you in closing out the financial aspects of the company.
Follow the guidelines established in your articles of incorporation to set the stage for closing your company. Guidelines typically specify shareholder input with regard to making the decision to close the business, determining a closing timeline and disposing of corporate assets.
Notify employees of the closing date and check state employment statutes to determine how long you have to issue final paychecks, including vacation pay and bonuses or profit-sharing. The Worker Adjustment and Retraining Notification Act requires corporations with 100 or more employees to provide a written 60-day notice of closure.
Inform employees of options regarding continuing health benefits through COBRA, if applicable, and rolling over or transferring retirement plans.
Notify suppliers, vendors, service providers and contractors of your plans to close. Fulfill or renegotiate the terms of contracts you have with each party and make final financial reparation.
Follow your articles of incorporation guidelines for selling property, equipment, machinery and merchandise.
Issue final tax, payroll and pension paperwork for your employees and your shareholders. The structure of an S corporation allows it to avoid double taxation by not paying corporate income tax on corporate profits. Instead, the tax ramifications of profits and losses of the corporation are the responsibility of individual shareholders. You will still have to submit a final tax return for your corporation.
Close out your employer identification number with the Internal Revenue Service after all final tax paperwork is completed.
Close accounts at financial institutions including checking accounts, lines of credit and credit cards. Make sure all final checks are cleared before closing accounts.
Cancel business licenses and special use permits through your local department of business licensing and taxation.