Carl
Level 15

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Basically, there's four things that need to be covered in order for the IRS to consider a SCH C business as "no more".
 - All assets must be disposed of. They can be reported as sold (if they were in fact sold of course), removed for personal use, destroyed, stolen, given away, removed for personal use, etc.
 - All Vehicular use in the business, including your personal vehicle used less than 100% for the business, has to be dealt with. Generally a vehicle is not "disposed of" the same way the business is and it's common for the vehicle to be shown as "removed for personal use". But other options are totaled/destroyed, sold, given away and a few other obscure things.
 - The EOY Inventory balance for the final year must be zero. The most common way this is achieved is for the business to report all remaining inventory as "removed for personal use", if that inventory can't be sold (even at a loss) prior to closing the business. But other possibilities are to report the inventory as destroyed or stolen. The latter happens most often when a business is destroyed by fire or hurricane for example, and the owner decides not to reopen.
 - All outstanding debts owed by the business, as well as those debts owed *to* the business need to be accounted for. If the business owes a debtor money and just can't pay it, then the SCH C business owner gets the fantastic opportunity of paying it out of their own pocket with funds from other sources if possible. If not possible then the debtor needs to forgive the debt with a 1099-C or the business may have to file bankruptcy.
If the business is owed money by a client or vendor then the business needs to either collect it, or else write it off as uncollectable. If it's a large amount, the business may want to issue the debtor a 1099-C. Generally the 1099-C is only necessary if the business was using the accrual method of accounting, instead of the cash method. If the debt owed to the business was accrued in a prior tax year and the business already paid taxes on that money in that prior tax year, then the 1099-C would most likely be called for in order to "deduct" the debt from the current year's business income.