Closing Sole Proprietorship

Closing Sole Proprietorship

Closing Sole Proprietorship: Example - For years, Donna's friend's told her that she should sell her delicious Baby Back Ribs. Once Donna learned how to use her computer, she realized that she could market, sell, and distribute her Baby Back Ribs over the Internet. She set everything up, she was required by state law to apply for a Certificate of Trade Name and give notice of her intent to do business as "Donna's Baby Back Ribs"." She also obtained a sales tax permit from her state tax authority and had her kitchen licensed. Donna and her husband did all of the work and she reported the profits and losses on her and her husband's jointly filed income tax return.

Closing Sole Proprietorship: Example - After five years in business, Donna became tired of always smelling like ribs and

decided to close down her business. Because all states have different requirements for closing businesses, Donna checked with the Small Business Administration office in her area to determine whether she needed to notify the secretary of state, local tax authorities, or licensing entities of her decision to close her business. She found out that she is required to send a letter to the secretary of state discontinuing the Donna's Baby Back Ribs trade name. She also had to notify the state tax authority and the licensing entity. That completed, it was time to dismantle her business:

  • She filled her final orders.

  • She closed her website in two stages - she initially posted a message about closing her business and no longer taking orders and removed the order-taking pages from the site. She planned a complete shutdown of the site a number of months later, when it seemed that enough customers had seen the message.

  • She notified her creditors and debtors that she was closing and told them to submit final bills or payments.

  • She paid all of her outstanding bills.

  • She made sure that her suppliers knew that she was no longer in business.

  • She donated the balance of her stock to churches.

  • She sold her equipment.

  • She put aside an appropriate amount of money for taxes and unknown creditors.

  • She notified her commercial liability carrier of her closure.

  • She kept detailed records of each transaction in anticipation of completing her income taxes.

Home | Closing Sole Proprietorship