Dissolving a Sole Proprietor Type of Business in North Carolina

By Elizabeth Rayne

North Carolina does not require sole proprietorships to register or to obtain a statewide business license. Instead, a sole proprietorship is operated under the name of the owner, and the owner remains personally liable for the debts of the business. Despite the flexibility and ease in creating this particular business entity, when dissolving your business you should follow a number of steps to ensure that there are no outstanding debts or tax obligations.

Cancel Registrations and Permits

Any registrations and permits that were acquired by the business should be cancelled when dissolving the sole proprietorship. If you were doing business under a different name than your own and had registered an assumed or "doing business as" name, you should cancel the registration. Assumed business names are acquired and withdrawn from the county where the business was located. Download the Withdrawal of Assumed Name Form from the county's website, or contact the county clerk if there is no website for your county. Fill out the form and file with the county with the appropriate fee. Contact any departments where business permits or licenses were acquired to cancel the permits; this will help protect your finances and your professional reputation.

Notify Business Partners and Customers

Notify business partners, lenders, creditors, and customers that your business is closing. Settle remaining debt of the business. As a sole proprietor, you will be personally liable for debts not paid by the business.

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State Taxes

Pay final state taxes and close your state tax account. Depending on the type of business, you may owe sales or payroll taxes. If you had registered for a sales and use tax number, cancel this number by completing and submitting an Out-of-Business Notification, Form NC-BN. The form is available on the Department of Revenue: Sales and Use Tax Forms page (see Resources).

Close Books and Accounts

Complete final bookkeeping for the sole proprietorship, and transfer the final numbers to your Form 1040 Schedule C (see Resources). Use this form to file your final income tax return. Close your business bank account and cancel all business credit cards.

Close EIN

If you had acquired an Employer Identification Number (EIN) for your business, close your account with the IRS. Although you cannot cancel the number, closing your account will notify the IRS that you no longer plan on doing business as a sole proprietorship. Submit a written request to the IRS with your reason for closing the account. The address is available on the IRS: Canceling an EIN page (see Resources).

Maintain Records

You should maintain records for your business three to seven years after dissolution. The state or the IRS may request to view financial, tax or employee information years after your business has closed.

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Closing a Sole Proprietorship in Tennessee



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