The process of liquidating a business can be a difficult task with many questions. Therefore in Hispanic Entrepreneurs we tell you what are the steps to follow to close a business in the United States.
Reasons to close your business?
Businesses close for various reasons because the market is in constant motion. Disagreements may arise between the partners or problems in the economic conditions that lead to wanting to end the company.
For entrepreneurs, reaching a crisis is leading to closure; because many businesses have not reached a breakeven point to go out and seek financing. The ideal thing is to comply with all the requirements and report on the closing so as not to have any problems in the future if they decide to liquidate the business.
Steps to follow to close a business in the United States
The first step in closing a business in the United States is to file a final return for the closing year. This declaration and the forms will depend on the type of company you own.
For example, a limited liability company is organized according to state law, that is, it has only one owner. Whereas, an association or collective partnership is a relationship between two or more partners.
The second step is to take care of the employees. Final salary and compensation owed must be paid to them. Another obligation is to make final federal tax deposits and report payroll taxes such as Social Security and Medicare.
In case of not doing so, you will have to pay a fine for recovery of the trust fund.
To declare payroll taxes you must submit:
-Form 941.
-Employer's quarterly federal tax return (in English), or Form 944 (SP).
-Annual Federal Tax Declaration of the Employer or Employer, for the quarter in which the final salary payments are made.
To tell the IRS that closed the business must check the box and enter the date in which final wages were paid on line 17 of Form 941 or on line 14 of Form 944.
Also, deliver the tax return showing the name of the person responsible for the payroll records and the address where they will be kept.
Likewise, you must submit a Form W-2 (Wage and Tax Statement) to employees and Form W-3 (Transmission of Income and Tax Returns) to Social Security. If they receive tips, they should enter Form 8027 and if they have pension plans or other benefits, they should consult publication 969.
Other steps to close a business in the United States
The third step is to pay the pending taxes, then report the payments to the outsourced workers through Form 1099-NEC, compensation for non-employees. In case you have paid any contractor for services during the calendar year in which the closing occurs.
It cancels the employer identification number (EIN) assigned to the business, which is the federal taxpayer identification number and the IRS business account.
To do this, you must send a letter that includes the legal name of the company, the business EIN, the business address and the reason why you want to close the account.
Keep records related to the property until the limitation period for the year of business closure expires.
Remember that in this period you can modify the tax return to claim a credit or refund, or for the IRS to evaluate additional taxes. And it keeps payroll tax records for at least four years.
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