Closing a business (self proprietor) - What do I need to do?

The next time you fill out your schedule C check the box Desposed of this business in the year you are filing your taxes.

Just stop filing the Schedule C

You might check with your state about the sales tax permit you have, some states require that you surrender the permit when you close a business.

It depends what state you are in so check with your state tax laws. In general this is what you need to do:

1) Hire a CPA to go over all your records

If you are closing your business or if your out-of-state business will no longer be conducting business in or if you are no longer subject to one of the taxes for which you are registered, you must follow the directions below to notify the Department of Revenue Services. I will use CT for an example:

Sales and Use Taxes

If the business holds a Sales and Use Tax Permit, and will no longer be making sales, you must follow these steps to cancel the Sales and Use Tax Permit:

File a final sales and use tax return (Form OS-114). Complete all parts of the return, including the bottom of the front page of the return that asks for the last date of business and sign the return.

Write the word "FINAL" prominently across the top of the return(OS-114)

Fill out the back of the Sales and Use Tax Permit (blue card) and enclose it with the final return

Mail your final return and permit card to the address on the form.

Corporation Business Tax

You may not close the corporation business tax account until you dissolve (if a domestic corporation) or withdraw (if a foreign corporation) with the Connecticut Secretary of the State. You may download the appropriate forms for dissolution or withdrawal on the Secretary of the State's Website or contact the Office of the Secretary of the State for information and forms at 860-509-6000.

After you dissolve or withdraw with the Secretary of the State, notify DRS and we will close the corporation business tax account. Send a copy of the dissolution or withdrawal papers or a letter with the date of dissolution or withdrawal and include the following information:

· the name of the organization

· its Connecticut tax registration number

· your name and your relationship to the organization; and

· your daytime phone number.

Mail to:

Registration Maintenance Unit

Department of Revenue Services

25 Sigourney Street

Hartford, CT 06106

Remember, you are required to file a final Form CT-1120, Connecticut Corporation Business Tax Return. The corporation business tax applies to any year or part of a year when the corporation was in existence.

Withholding Tax

If an employer goes out of business or permanently stops paying wages, the employer should notify DRS immediately by filing Form CT-941, Connecticut Quarterly Reconciliation of Withholding, for the current quarter. The employer should check the box indicating that the employer no longer has employees and enter the last payroll date on the line provided on Form CT-941 or send written notification to:

Department of Revenue Services

Registration Unit

PO Box 2937

Hartford CT 06104-2937

An employer must also file Form CT-W3, Connecticut Annual Reconciliation of Withholding, issue Forms W-2 to all employees showing their wages and withholding, and submit copies of all Forms W-2 to the Department of Revenue Services.

If the business had employees, you must also cancel its registration with the Connecticut Department of Labor.

Business Entity Tax

You may not close the business entity tax account until you dissolve (if a domestic S corporation, limited liability company, limited liability partnership or limited partnership) or withdraw (if a foreign S corporation, limited liability company, limited liability partnership or limited partnership) with the Connecticut Secretary of the State. You may download the appropriate forms for dissolution or withdrawal on the Secretary of the State's Website.

After you dissolve or withdraw with the Secretary of the State, notify DRS and we will close the business entity tax account. Send a copy of the dissolution or withdrawal papers or a letter with the date of dissolution or withdrawal and include the following information:

· the name of the organization

· its Connecticut tax registration number

· your name and your relationship to the organization; and

· your daytime phone number.

Mail to:

Registration Maintenance Unit

Department of Revenue Services

25 Sigourney Street

Hartford, CT 06106

Remember, you are required to file a final Form OP-424, Business Entity Tax Return. The business entity tax applies to any year or part of a year when the organization was in existence. You are also required to file a final Form CT-1065/CT-1120SI, Composite Income Tax Return. For detailed information on filing requirements visit the webpage for either:

S Corporation Tax Information or

Partnerships, LLCs and other Pass-Through Entities.

Insurance Premiums Tax and Health Care Center Taxes ( Domestic and Foreign Insurance Companies)

Insurance companies wishing to inactivate their DRS tax registration (go out of business) for the Connecticut Insurance Premiums Tax or Health Care Center Tax must contact the Connecticut Insurance Department at 860-297-3814. Once verified and approved, the Connecticut Insurance Department will forward the information directly to DRS to be used to inactivate the tax registration of the insurance company or health care center. DRS will not accept a request to cancel a tax registration for the Insurance Premiums Tax or Health Care Center Tax directly from the insurance company.

Also call your state and the Fed IRS where you received your EIN and cancel that as well.

Yes, I believe so and if the tax man ever needs proof, since you're the only one running your business, you can just write them a letter saying you ceased doing business on (date).

You are correct. Just stop filing.

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