When you close up shop, you'll have to notify the Internal Revenue Service and file final payroll taxes if you have any employees. The IRS is notoriously stringent about collecting payroll taxes; even if your business declares bankruptcy, you still might have to pay the taxes. Regardless of whether you have any staff, if you sell assets, you'll have to pay taxes on capital gains and income from the sale of inventory.
The best contacts and resources to help you get it done
File payroll taxes
If you have staff, you'll have to file final employment tax returns and make final federal deposits of those taxes. You are personally liable for these taxes, even if your business has run out of money. If you can't pay, try to negotiate a settlement with the IRS.
I recommend: Use
Form 941 and
Form 940 to pay final pay wage and unemployment taxes. If you need to hire a lawyer to negotiate with the IRS, you can find one online at
Lawyers or
FindLaw.
Decide whether to sell all assets together
If you sell the business, you'll have to pay taxes on capital assets, real estate and inventory.
I recommend: If you sell business assets piecemeal, you should file
Form 4797. If you sell all of your assets together, consider filing
Form 8594. The IRS's
Publication 544 provides additional guidance. You might need to consult a tax lawyer to calculate the amount owed.
Notify tax authorities
File a final annual return with the IRS and your state tax authority. Partnerships, corporations, S Corporations, limited liability corporations or trusts include a box near the top front page; check this box to indicate the tax return is the final one. If you're a sole proprietor, you can just stop filling out Schedules C and SE.
I recommend: For additional information about required paperwork, the IRS publishes a
checklist of steps necessary to close a business.