Exiting a Business Partnership
Business partnerships can sometimes be one of the more challenging types of business arrangements. Over time, many a partner has eventually wondered what possessed them to choose the other person to go into business with. If you and your business partner have jointly decided it's time to call it quits and close up shop, follow these guidelines to make sure you're following the letter of the law.
Different states have different laws that regulate how a business partnership must be dissolved. If you're unsure of the laws in your state, check with the secretary of state office for the state in which your business is located. Some states require that you obtain a special permit or clearance from your state tax board to ensure that all outstanding state taxes have been paid.
You will also have to cancel any permits or licenses issued by the state or county. Allowing a third party to operate under your selling permit or business name can make you responsible for additional taxes and penalties. Also, if you've been operating under a fictitious or assumed name, you'll need to file an "abandonment" application. Your local county clerk's office will advise you on the proper paperwork to fill out.
Just because you're dissolving the business and ending the partnership doesn't mean you don't have to make any tax payments that are due. The IRS will especially be looking for the last payroll tax payment, so be sure you make it on time. Read Tax Concerns When Selling Your Business for some pointers in this area.
Notify your creditors ahead of time that you'll be closing your doors and pay those final bills on time. Don't leave any debts outstanding. You want to end the business on a positive note, so make sure you also notify your customers and vendors in a timely fashion. Even though the business is closing, you want to remain on good terms with everyone you've done business with, as you may do business with them again in the future.
Lastly, be sure to save your records and keep them carefully organized in case you have to refer to them in the future.
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