Closing a Business Key Terms
Learn key terms related to closing a business to facilitate this difficult transitionAt one point or another, most business owners consider what it would be like to close their business. When debt is rising faster than revenue or when the same products you ordered six months ago are still on the shelves, you’re beginning to realize that the business is no longer profitable and the only viable option is to close. While the decision to close may troublesome, the consequences of not carrying out all closing obligations could be worse. Becoming familiar with the following key terms can help you through this unpleasant transition.
Carry out all obligations
Warning signsThe warning signs indicating it's time to close a business are different in each case. These signs can include an escalating debt-to-asset ratio that exceeds the 50% mark. There could also be an increase in your debt-to-shareholder-equity ratio, which means your business could become more unstable.
Typical actionsOnce the decision is made to close a business, companies perform what have become known as typical actions. These actions usually refer to the filing of tax returns. These include: federal tax deposits, employment tax returns, an annual tax return from a corporation or partnership. There are even tax returns relating to the disposition of business property.
Closing the booksIf you're closing your business, you'll need to close the books in order to file your final income tax return. To do this, you'll send out the final payments to your suppliers and the final customer statements. You'll also need to send your final sales tax reports to the state.
Sales and use taxesYou can't complete the closing of a business until you've canceled the sales and use taxes Permit. This tells the state that your company has ceased all sales activities. It involves the filling out of certain tax returns that get mailed to the state your business was operating in.
Connecticut’s website, which is typical of the procedure followed in most states.
Certificate of dissolutionYour business won't be considered closed in some states until you've filed a certificate of dissolution. This official document usually identifies the date you're filing the certificate, the corporation and whether you've paid the appropriate fees.
Copyright © 2013 Business.com, Inc. All Rights Reserved.