Dissolution of business could be for variety of reasons for example: bankruptcy, retirement, or a change in career direction. When a business entity is no longer doing business or even if it was never used for anything, it is very important that it follows the legal steps in "winding itself up" as a legal entity.

A business Corporation, S Corporation or an LLC is an entity created under authority granted by the state. Its existence may only be terminated by the state. The Business Law provides a procedure for dissolving a corporation or an LLC. All legal entities can only be dissolved through formal action, not by a letter or phone call. You remain liable for all taxes, assessments, fines, penalties and interest until you receive a certificate of dissolution from the Secretary of State.

There are typical actions that are taken when closing a business on Federal and State Level:
Federal (IRS)

    * You must file an annual return for the year you go out of business.
    * If you have employees, you must file the final employment tax returns.
    * Make final federal tax deposits.
    * File final quarterly or annual employment tax form.
    * Issue final wage and withholding information to employees.
    * Report information from W-2s issued.
    * File final tip income and allocated tips information return.
    * Report capital gains or losses.
    * Report partner's/shareholder's shares.
    * File final employee pension/benefit plan.
    * Issue payment information to sub-contractors.
    * Report information from 1099s issued.
    * State (Where your business is formed):
    * You must file an annual return for the year you go out of business.
    * If you have employees, you must file the final employment tax returns with your State.
    * Make final State tax deposits.
    * File final quarterly or annual employment tax form.
    * If you collect Sales Tax in your State. File final Sales Tax Return.

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