Closing a Sole Proprietorship in Tennessee

By Elizabeth Rayne

The process of closing a sole proprietorship in Tennessee is straightforward, but business owners must follow the procedures carefully to ensure that no business debts or obligations remain unpaid. A sole proprietorship is essentially an alter ego of the business owner, who is personally liable for its debts. In Tennessee, sole proprietorships do not have to register with the state but may be required to register with tax authorities or other local agencies.

The process of closing a sole proprietorship in Tennessee is straightforward, but business owners must follow the procedures carefully to ensure that no business debts or obligations remain unpaid. A sole proprietorship is essentially an alter ego of the business owner, who is personally liable for its debts. In Tennessee, sole proprietorships do not have to register with the state but may be required to register with tax authorities or other local agencies.

Step 1

Cease all business operations. If you own a retail store, set a date to close the doors to customers. Notify employees that the business is closing.

Ready to start your LLC? Start an LLC Online Now

Step 2

Distribute final paychecks to employees, if any wages are owed. File final tax forms, including federal unemployment and income tax returns. Issue final wage and withholding information to employees on Form W-2, and report withholding information to the IRS on Form W-3.

Step 3

Pay off outstanding debts. Notify creditors and lenders that the business is closing and create a plan to settle all accounts payable. Sell business assets if necessary to generate funds to pay off the debts. As a sole proprietor, you are personally liable for unpaid debts, so make sure these liabilities are paid in full. Once this has been done, close your business bank accounts.

Step 4

Cancel any state professional or occupational licenses. Contact the state agency that issued each license to initiate the cancellation, and file any forms required to finalize the process.

Step 5

Cancel local business licenses and permits. When you set up the business, you were required to obtain a business license from the county in which you planned to do business. Contact the County Clerk to cancel the permit.

Step 6

Close state and federal tax accounts, if applicable. If you operated a retail store, you may have a sales and use tax account with the state. Close your state tax accounts by calling the Tennessee Department of Revenue. If you have an Employer Identification Number with the Internal Revenue Service, close the EIN account by submitting a written request to the IRS. Include your original EIN notification letter and indicate the reason you are closing the account.

Step 7

Cancel your assumed business name, if you applied for one. Tennessee sole proprietorships are not required to register fictitious business names, but you may have done so when you started your business. Visit the Tennessee Department of State website and click on "Corporations" under "Business Services." Click on "Forms and Fees" under "Corporations" and download the Application for Cancellation of Assumed Name. Complete and submit the form with the required fee.

Step 8

Maintain financial records. The IRS and the state may audit your business records and employer information for three to seven years after dissolution of your sole proprietorship.

Ready to start your LLC? Start an LLC Online Now
How to Dissolve a Corporation & Form a New One

References

Related articles

Guide to Setting Up a Sole Proprietorship in Florida

A sole proprietorship operates as an alter ego of the business owner who runs it. Since the owner is personally responsible for business affairs, Florida does not require a separate state-level registration for the business as long as you operate it under your own name. If you want to run the business under a different name, you must register it with the state. Depending upon the type of business you are conducting and where you are located, you may also have to obtain local licenses and permits to before you can open for business.

How to Start a Sole Proprietorship in Maryland

A sole proprietorship is a common business entity because it is relatively simple to set up and has few filing requirements. In Maryland, new business registrations are handled by the Department of Assessment and Taxation. Although you are not required to register a sole proprietorship with the state, you may be required to obtain state and local occupational licenses and business permits, depending on the type of business. Many sole proprietors are also required to register with the state tax authority.

What Happens to Your EIN When Dissolving a Corporation?

When you formed your corporation, you applied for an Employer Identification Number (EIN) from the Internal Revenue Service. This number uniquely identifies your business, and it is used on federal tax filings and all other correspondence with the IRS. State government agencies also typically require the use of the EIN on tax filings and correspondence. If you are thinking about winding down the business of your corporation, you might wonder what will happen to your EIN and whether it terminates when your business is dissolved.

LLCs, Corporations, Patents, Attorney Help

Related articles

Dissolving a Sole Proprietor Type of Business in North Carolina

North Carolina does not require sole proprietorships to register or to obtain a statewide business license. Instead, a ...

Sole Proprietorship in Georgia

A sole proprietorship is a common business entity because it is relatively simple to set up and allows for a great deal ...

Dissolution of Sole Proprietorship

When it comes time to discontinue the operations of a business formed as a sole proprietorship, owners may find ...

How to Register a Business Entity

It is essential that you register your business properly to avoid fines and penalties from the federal government and ...

Browse by category