Sole proprietors operate their businesses alone or as part of a married couple; they assume responsibility for all business debts and liabilities. You can set up, operate and close a sole proprietorship with relatively few formalities in Washington State. Sole proprietorships close for different reasons, including ill health, economic factors, or re-structuring the business. When closing a business, you should keep copies of relevant paperwork to avoid future problems.
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Advise Clients and Creditors
If you decide to close your sole proprietorship, you must inform all clients, business associates and creditors, preferably in writing. To facilitate the final accounting, you should ask all creditors to submit their invoices by a named deadline. If your business operates a website, you should also post a notice announcing the imminent closure of the sole proprietorship. If you have excess inventory, you can arrange an “end of business” sale, sell the inventory to a competitor, or donate it to a local charity.
Sole proprietors remain responsible for all the business’s tax liabilities, even after the business closes. If you close a business in Washington State, you should inform the Department of Revenue within 10 days of closure and complete a tax return. After closure, you should keep all business records for five years. A sole proprietor should also inform the IRS of the closure, file an annual return for the final year of business and pay all relevant taxes when due.
If you operate your business under a fictitious name, also known as a DBA, you should inform the Washington Business Licensing Service that you will no longer be trading under this name. If you trade under your own name, this step is unnecessary.
When you start a business in Washington State, you must obtain a state business license if you sell goods to consumers, hire employees or expect to earn at least $12,000 in a year. When the business no longer operates, you should inform the Business Licensing Service and close your business license account. You can either do this online or by completing and mailing the relevant business information change form.
Close Bank Accounts
Although not legally necessary, most sole proprietorships run separate business and personal bank accounts. If you operate a separate business bank account, you should arrange to close this once you have paid all bills.
References & Resources
- Washington State; Governor’s Office of Regulatory Assistance: Small Business Guide - Close
- Washington State: Department of Revenue – Close My Account
- IRS.gov: Closing a Business Checklist
- State of Washington: Business Licensing Service – Frequently Asked Questions: Business Licensing
- State of Washington: Business Licensing Service – Close Your Business Account
- State of Washington: Business Licensing Service – Business Information Change Form
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