Closing a Business

Ensure that the proper steps are taken to close a business, or transfer ownership to another party.

Develop an Exit Strategy

1. What steps should I take in planning my exit?

   When it comes to planning, how you exit your business is just as important as how you start it. The goal is to maximize the value of your company before converting it to cash and minimize the amount of time consumed.

2. What type of exit strategies for my business are there?

   If you're thinking ahead to the day when you'll no longer run your business, think about these five exit strategies now so you'll be prepared for your future.

3. How should I develop a succession plan?

   Continuing a business beyond one generation of leaders requires planning. Whether through private shares transferred to a senior manager, or a leadership transfer to family members, a succession plan smoothes the way for continued business success.

Close Your Business

1. What resources are available to determine a successful closure to my business?

   A Chronology: A Road Map to Closing Down Your Business - Closing up a business takes more than just walking away. There are legal, tax, and financial matters which must be addressed. Use this resource as a guide to the steps an owner must take when closing the business' doors.

   Meeting with a Lawyer: Closing a Business - If you are closing any form of business other than a sole proprietorship, you will probably want to retain an attorney to determine the appropriate procedure for notifying various state authorities and the IRS of your intentions.

   Checklist: Dissolution and Winding Up - Whatever the form of your business, you will need to follow an organized plan for closing your doors. Your plan, in most instances, will have to follow guidelines set forth in your state statutes, the Internal Revenue Code, and state and local tax authority regulations. This checklist is adopted from the Model Business Corporation Act and is specific to corporations.

2. What actions should I take at the state level?

   There are several actions that are taken when closing a business.

   File dissolutions, withdrawal or cancellation - A dissolution, withdrawal or cancellation needs to be filed with the Kansas Secretary of State’s office. All annual reports must be filed prior to filing the dissolution, withdrawal, or cancellation.

   Complete the Notice of Discontinuation of Business - You need to notify the Kansas Department of Revenue when you close your business. This allows the department to close your account and stop sending forms for future periods. Failure to properly notify the Kansas Department of Revenue may cause unwanted correspondence or additional contacts for tax filing. If the department does not know you have closed your business you may be viewed as a non-filer owing back taxes.

3. What actions should I take at the federal level?

   When closing your business, consider the following actions from the IRS:

   • 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-2's 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 subcontractors
   • Report information from 1099s issues
   • Report corporate dissolution or liquidation
   • Consider allowing S corporation election to terminate
   • Report business asset sales
   • Report the sale or exchange of property used in your trade or business
   • Cancel an employer identification number

Change Your Business Structure

1. What do I need to do if I change my business structure?

   If you already have an Employer Identification Number (EIN), you may need to get a new one if either the organization or ownership of your business changes. If you incorporate a sole proprietorship or form a partnership, you must get a new EIN.

2. What do I need to do if I change my business name?

   Business owners and other authorized individuals can submit a name change for their business. The specific action required may vary depending on the type of business. In some situations a name change may require a new Employer Identification Number (EIN) or a final return.

3. Do I need a new employer identification number?

   Generally, businesses need a new EIN when their ownership or structure has changed. Although changing the name of your business does not require you to obtain a new EIN, you may wish to visit the Business Name Change page to find out what actions are required if you change the name of your business. The information below provides answers to frequently asked questions about changing your EIN.

Sell Your Business

1. How do I decide when and whether to sell my business?

   Deciding to sell a business you have founded, nurtured, and grown can be agonizing - or liberating. Owners choose to sell their businesses for many reasons, from retirement to a hope that new management can turn a greater profit.

2. What rules should I follow in selling my business?

   A few rules apply: Hire an experienced appraiser, sell assets rather than the business entity, and don't assume the buyer is in the chips.

3. Can you help me better define what goes into selling a business?

   The sale of a business usually is not a sale of one asset. Instead, all the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss.

4. What are the eight key steps to selling a business?

   In selling your business, consider these practical steps for making the process go smoothly.

5. What advice is there in finding the best business broker?

   Selling your business for the highest price is the result of years of dedication and persistence. Finding buyers for your business sale can be difficult if you aren't in a hot industry or lack unsolicited offers. An option to gain access to a larger pool of buyers is to consider a business broker.

6. What are the 12 crucial steps to selling a small business?

   Only 30% of all businesses for sale that are put on the market are sold - a surprising statistic to most owners, agents, and business brokers trying to sell a business. If however you follow these steps and tips your chances of selling dramatically increases.

7. How do I know how, when and how much to sell my business for?

   It is more than just important to know how, when, and how much to sell your business for. There is a big difference between properly preparing your assets to be sold and putting a for sale sign on the front door. Knowing the difference can pay big dividends.

8. How should I approach selling business assets?

   Selling business assets, especially under trying or forced circumstances, can be difficult. However, knowing what to do and how to do it when it comes to selling company assets can help return the most value. You deserve to get as close to market value for your assets as possible.

Transfer Business Ownership

1. What are estate and gift taxes?

   The estate tax is a tax on your right to transfer property upon your death. It consists of an accounting of everything you own or have certain interests in at the date of death. If you give someone money or property during your life, you may be subject to federal gift tax. Find some common questions dealing with these issues.

2. How do I transfer management in a family-owned business?

   At any given time, 40 percent of U.S. businesses are facing the transfer of ownership issue. Founders are trying to decide what to do with their businesses; however, the options are few. The following is a list of options to consider (83 KB).

File Bankruptcy

1. What are some alternatives to declaring business bankruptcy?

   There are two common non-bankruptcy alternatives for a financially distressed business. The first is an out-of-court workout, which, if successful, would allow the business to continue to operate without court supervision. The second is an assignment for benefit of creditors, which is a vehicle for liquidating the business outside of a bankruptcy with minimal state court supervision.

2. Can you help me understand the basics of bankruptcy?

   Bankruptcy Basics provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of the federal bankruptcy laws. It also provides individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed and to answer some of the most commonly asked questions about the bankruptcy process.

3. What are some frequently asked questions about business bankruptcy?

   In filing for bankruptcy, there are several questions that you may have. The following list several questions and answers to assist in the process.

4. What are the steps in declaring bankruptcy?

   Bankruptcy proceedings begin with the filing of a petition with the bankruptcy court. The filing of the petitions creates a bankruptcy estate, which generally consists of all the assets of the person filing the bankruptcy petition. A separate taxable entity is created if the bankruptcy petition is filed by an individual under chapter 7 or chapter 11 of the Bankruptcy Code.