Every business will eventually come to an end. Whether because of personal, financial, or other reasons, it may be time to close your corporation. If you’re operating a corporation or limited liability company (LLC) in Connecticut, it’s not enough to simply close your doors. Consult a business lawyer to make sure the proper steps are taken and there are no loose ends.
There are as many reasons to close a corporation business as there are businesses. These are some of the most common ones:
- Business or financial failure
- Legal problems
- Market changes and increased competition
- Disputes among board members on how to operate the business
- Health issues or death of a board member, manager, or owner
But closing a corporation or LLC is not as simple as walking away from it. You may have ongoing contracts, construction projects, or obligations to fulfill. Employment matters may arise during the process of closing or still be unresolved from a prior dispute. Perhaps your company has been sued or you agreed to be personally liable for a business loan. There could even be additional responsibilities that come up because you are closing.
Leaving these matters unresolved before drawing the business to a close risks future liability. You could find yourself on the hook for action taken by the government, a former employee, or a business partner. So what are some things you should do to properly wind down your corporation or LLC?
You need to file Articles of Dissolution to dissolve the LLC or a Certificate of Dissolution for the corporation. There is a nominal fee for doing so. You will also need to withdraw from each state in which you’ve registered to conduct business. Not dissolving your business means it will continue to exist as a legal entity. This means it will face continuing business filing and tax obligations, in addition to potential liability. Talk to a Connecticut business lawyer about what you may need to do before filing these documents.
To dissolve your corporation or LLC, you will need shareholder or member approval. Typically the corporate bylaws or the LLC’s operating agreement will spell out how to do this. If you have questions, you can ask a Connecticut business lawyer for guidance.
Finalizing business taxes is a major part of shutting the business down. In Connecticut, you do not need tax clearance from the Department of Revenue to effectuate your dissolution. However, you do need to close your business tax account and pay any final tax bills after dissolving. To file your final Form CT-1120, the Connecticut Corporation Business Tax Return, visit the state’s Department of Revenue website.
Employers who go out of business or permanently stop paying employees must immediately notify the Department of Revenue. This is done by filing Form CT-941, Connecticut Quarterly Reconciliation of Withholding, for the current quarter. You will also need to file Form CT-W3, Connecticut Annual Reconciliation of Withholding, and issue W-2s to all employees. Copies of the W-2s must be sent to the Department of Revenue. Finally, the business is required to cancel its registration with the Connecticut Department of Labor.
Any permits or licenses your corporation or LLC held will need to be canceled as well. This step of the wind-down process is often overlooked. You may have licenses or permits from various levels of government, from federal to municipality. Many businesses have a Sales and Use Tax Permit through the state of Connecticut. To cancel it, file a final sales and use tax return (Form OS-114). There are additional steps you need to take to ensure the form is properly processed. Consult a Connecticut business lawyer for details.
Closing a Business is Complicated, but We’re Here to Help
The above steps are just some of the ones necessary to draw down your business. Depending on the nature of your LLC or corporation, you will likely need to take further action. If your business is a sole proprietorship, partnership, or some other legal entity, there may be different requirements. The attorneys at Aeton Law Partners can walk you through this complex process. Contact us today to get started.