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How do I go about closing my business? I filed my 2018 returns as normal but in 2019 I have not done any business so I have decided to just end it. How do I do this?

 
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6 Replies
Carl
Level 15

How do I go about closing my business? I filed my 2018 returns as normal but in 2019 I have not done any business so I have decided to just end it. How do I do this?

It depends on what type of business you have and what state you're in. Sole proprietorship? Single member LLC? Multi-member LLC? S-Corp? C-Corp? Partnership? Something else?

 

How do I go about closing my business? I filed my 2018 returns as normal but in 2019 I have not done any business so I have decided to just end it. How do I do this?

@Carl It’s a sole proprietorship/LLC, registered in Kansas/Missouri.

Carl
Level 15

How do I go about closing my business? I filed my 2018 returns as normal but in 2019 I have not done any business so I have decided to just end it. How do I do this?

Actually, it's either a sole proprietorship or it's a single member LLC. I'm assuming you have an LLC since a sole proprietorship does not require state registration, while an LLC does.

For the federal side, (and it should "carry over" to your state return)

You need to report your business as "sold or otherwise disposed of".

Start working through your business "as if" you still own it. On the 2nd or 3rd screen in select the option for "I sold, closed or otherwise disposed of this business in 2018". If prompted for the date, enter the day after you last day of business in 2019.

If your business had no income in the tax year, you can not leave the business income section blank. You 'must' enter a digit, even if that digit is a ZERO.

If you had no business expenses, then you can leave that blank and don't even have to work that section through, if you don't want to.

If your business carried an inventory, the end of year (EOY) inventory must be zero. If it's not, then in the COGS section (Inventory/Cost of Goods Sold) indicate that you removed the entire remaining inventory for personal use. That effectively makes your EOY inventory balance, zero.

If your business had assets, then you must show the disposition of those assets. In the Business Assets section work through each individual asset on at a time, and select YES on the screen, "DId you stop using this asset in 2019?". Then on the next screen, "Special Handling Required?" if you sold the asset, select no and you will be prompted for your sales information on that specific asset. If you did NOT sell the asset, click the YES button. You must do this for each individual asset listed, even if it's already fully depreciated.

If you claimed any vehicle expenses in your business at any time from the day you opened your business, then you must most show the disposition of that vehicle. Work through the Business Vehicle Expenses section and indicate that you stopped using that asset in the business, when prompted. Then show your disposition of that vehicle. Most likely, you'll indicate that it was removed for personal use.

Once you have done all the above, that will make the 2018 tax year the last year you will file a SCH C for this specific business.

 

You may also need to file with each state's business division (sometimes called the "Division of Corporations") a separate document that has absolutely nothing to do with taxes, to report the closure of the business. This filing is commonly referred to as "Articles of Dissolution". So you'll have to check the state's business registration website for that information.

How do I go about closing my business? I filed my 2018 returns as normal but in 2019 I have not done any business so I have decided to just end it. How do I do this?

@Carl @I think I understand this. So I will do all of this in 2020 when I file my 2019 returns, correct? Also, by doing this it takes care of everything at the state level as well and I won’t need to file any paperwork with the state(s) to close the business?

Carl
Level 15

How do I go about closing my business? I filed my 2018 returns as normal but in 2019 I have not done any business so I have decided to just end it. How do I do this?

So I will do all of this in 2020 when I file my 2019 returns, correct?

That would be simplest, and you just give a closing date of 1/1/2019.

Also, by doing this it takes care of everything at the state level as well and I won’t need to file any paperwork with the state(s) to close the business?

I can't state that for an irrefutable fact. This is why it is important to review "ALL' returns being filed *before* you actually file them. I said I would just *EXPECT* the closure to be carried over to the state return. That does not mean that it will be necessarily.

Do remember however, that for an LLC you still have to file "Articles of Dissolution" with the state, and that has absolutely nothing to do with taxes what-so-ever.

How do I go about closing my business? I filed my 2018 returns as normal but in 2019 I have not done any business so I have decided to just end it. How do I do this?

@CarlPerfect, thank you so much for the help.

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