With all the talk and news about protecting your credit card and personal information online, people are hypersensitive about protecting their information when they’re on the internet. Additionally, trust is an important factor when a customer decides whether they want to do business with a company.
Did you know that at least 43% of cybersecurity attacks are aimed at small businesses? Unfortunately, this number is expected to increase.
Our latest infographic, “Top Online Threats to Small Businesses,” shows the key types of malware and how your small business can best protect itself from attacks.
New entrepreneurs have a long list of to-dos when starting their businesses. Among the tasks to check off that list is deciding their business structure. For small businesses with a sole owner and no (or very few) employees, the two most popular options are:
Single-member LLC (Limited Liability Company)
So, which one might be the best choice for your business?
Feeling overwhelmed by labor law posting compliance? Not sure what’s necessary for your business right now? You’re not alone.
According to the second annual National Small Business Compliance Pulse Survey, sponsored by ComplyRight, fewer than 50% of small business employers are fully confident in their understanding of federal, state and local employment laws and regulations. Further, they consider managing these laws a top concern — more than any single, specific regulatory topic.
Do you remember where you were on May 25, 2018? No? That was the day that the General Data Protection Regulation (GDPR) went into effect. It was a regular business day, and the sky did not fall, like many predicted it might. Indeed, work continued as usual, and all businesses cruised into the post-GDPR era. Some were prepared, others not, and many were, and still are, vastly unaware of what GDPR is or how to comply.
For most entrepreneurs, the thought of closing their small business is generally not one that frequents their minds. However, for any number of untold reasons, such as the owner deciding to move to other ventures or the company simply running its course, it’s not a bad idea to have an understanding of what it means to formally close the business with the state.
If you are currently in the process of voluntarily ending the business’ operations, take care of these areas to ensure your business is officially terminated with the state.
1. File articles of dissolution.
If you incorporated as a limited liability company (LLC) or as a corporation and are already in good standing with the state, part of terminating your business means filing articles of dissolution. This document serves as a formal closure notice of the business. You may need to check in with the state you’re closing the business in to see what kind of information is required when filing, but generally you will need to include:
- Name of your business
- Date the dissolution will go into effect
- Reason for dissolving the company
- Whether or not your business has any pending legal actions.
By filing articles of dissolution, you are notifying the Secretary of State your business is closed. You won’t need to continue paying state or renewal fees, file annual reports, or complete any other obligatory paperwork because the business will no longer exist through the eyes of the state.
Before you file the articles of dissolution, however, you will need to have everyone vote and agree on the dissolution. If you incorporated as an LLC, “everyone” means your managing members. They must agree to and grant approval for the dissolution. For corporations, this would be the board of directors and shareholders. The corporation’s directors draft and approve a resolution to dissolve the business, then hold a meeting where minutes and documented and shareholders vote on it. If you are unable to secure enough votes to dissolve the company, you may not be able to dissolve the business.
2. File an application of withdrawal.
If your company is registered to do business in any other outside of your home state, you must file an application of withdrawal (also referred to as a certificate of termination). Failing to do this means that although your business is closed in one state, it is still considered to be open in another and is therefore liable for taxes and fees.
3. Notify and pay employees.
As soon as you are able to, you must notify your employees (if you have any) about the business closing so they are not left in the lurch. They must be compensated with their final paychecks, bonuses, and any unpaid vacation days (if required by the state) on their last day of work. Employers must also file final employment tax returns along with final federal tax deposits of these taxes.
The IRS keeps a handy checklist available detailing employee forms to file before the business closes that include, but aren’t limited to:
- Final employment tax forms
- W-2 forms
- Form 1099-MISC for sub-contractors
- Form 5500 for employee pension and benefit plans.
If you have an employer identification number (also known as an EIN, which is a requirement before hiring employees), you may also notify the IRS should you decide to stop doing business under the EIN.
4. Send cancellation notices and file Form 966.
If your business is incorporated as a public corporation, it is required by most states to make a formal announcement about closing down in a dissolution proposal. This proposal will be made public record and will name the corporation and confirm that a majority vote ruled in favor of the dissolution. Additionally, corporations must file Form 966 within 30 days of filing their articles of dissolution.
5. Distribute assets.
Before you can distribute the company’s assets, make sure you have paid off any outstanding debt, notified creditors associated with the company, and closed your business bank accounts. If assets still remain, they must be distributed to owners based on the percentage of the company that they own. Assets at LLCs are distributed by how much the members originally contributed. Corporations pay shareholders based on the amount of shares they own with shareholders returning their outstanding shares.
6. Tie up any remaining loose ends.
Before you pack up your final boxes, I recommend referring back to the IRS checklist to ensure you have not forgotten anything. Then, you can lock your doors forever, and bid your small business a fond farewell.
Running a small business is both exciting and rewarding. But keeping up with all the latest employment laws can be complicated. The last thing you want to do is put your business at risk by making a mistake that could result in costly legal fees or fines.
In this e-guide, we’ll take a look at these 5 common HR mistakes:
- Treating independent contractors like employees
- Practicing “accidental” discrimination when hiring
- Not properly verifying work eligibility (via I-9 forms)
- Putting employees who don’t legally qualify on salary
- Not displaying all required labor law postings
Each section will cover why these laws matter, how to identify whether you have a potential problem, and what immediate steps you can take to address them.
About the Author(s)
ComplyRight creates practical products and services to help small businesses complete essential HR and tax reporting tasks in an efficient and legally sound manner. From hiring to firing, to mandatory employee postings, to 1099 and W-2 processing, our solutions are guaranteed to be 100% compliant with federal and state (and in some cases, local) employment laws. Our direct brands include HRdirectapps.com (simple and smart online HR software), PosterTracker.com (complete range of ComplyRight posting solutions), efile4biz.com (online 1099, W-2 and ACA form processing), and HRdirect.com (leading provider of ComplyRight HR products).