If you have a sole proprietorship, you can decide to stop your business and close your doors if your venture isn't successful. Before officially closing the business, you should make sure that all of the business's obligations are finished. If you don't wrap up the sole proprietorship properly, you can be held personally responsible for any remaining debts, taxes or other obligations.
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Notify your employees of the date you will stop your sole proprietorship, if you are required to do so. Federal laws require that you give your employees 60 days' written notice if you have more than 100 employees. Some states also have their own notice provisions and may require notice for businesses with fewer than 100 employees.
Fill any outstanding orders for your business' goods or services. If the business is under contract to do the work, you can be held personally liable if it isn't completed.
Cancel any licenses, permits or registrations with your state government that you have for the business. Most states do not require sole proprietorships to register, but many require you to register if you do business under an assumed name.
Sell any business assets, such as equipment and office furniture.
Pay any known creditors.
Notify any suppliers that you are ending your business and tell any insurance carriers that you are closing.
Set aside enough money to pay all of your business tax obligations. This includes any outstanding sales, employee withholding and income taxes. Set aside more money in case your business has creditors that you don't remember.
File all your taxes with the federal government and your state government at the appropriate time. Keep all of your business records, in case you need them later for a tax audit or other dispute.
Tips & Warnings
- If you don't already have an accountant, consider hiring one to make sure that you properly account for all of your business' debts and tax obligations before closing shop.