Closing a business involves more than just locking the doors and ceasing operations. To ensure a smooth and legally compliant closure, you’ll need to take specific steps, such as filing the necessary paperwork, settling debts, and notifying the appropriate authorities. This guide provides an overview of the process for closing a business in Colorado, including important considerations to avoid potential liabilities in the future.

You absolutely must speak with your CPA or tax preparer prior to taking any steps towards closing your business

 

This is not a full, complete, or exhaustive list of the steps required to close a business in Colorado. It’s necessary to first consult with your tax preparer and legal counsel to ensure all steps are completed correctly and in compliance with Colorado laws.

Review Governing Documents:
Examine your business’s operating agreement, bylaws, or partnership agreement to understand the procedures for dissolution. These documents typically outline the necessary steps and required approvals for closing the business.

Obtain Necessary Approvals:
Secure the required consent from owners, members, or shareholders as specified in your governing documents. This often involves a formal vote or written agreement to dissolve the business.

Notify Creditors and Settle Debts:
Inform all creditors, customers, and employees of your business’s dissolution. Settle any outstanding debts and obligations to ensure a clean closure.

Close the Books and Perform Final Reconciliations:
Before officially closing the business, ensure your financial records are up to date and accurate:

• Reconcile all bank accounts and credit cards to ensure balances match your financial statements.
• Review outstanding invoices and collect any remaining receivables.
• Record all final expenses and liabilities.
• Generate a final balance sheet and income statement for record-keeping purposes.
• Work with your accountant to ensure all financial records are properly closed for tax reporting and archival purposes.

Distribute Remaining Assets:
After settling debts, distribute any remaining assets among the owners or shareholders according to ownership interests and legal requirements.

File Dissolution Documents:
Submit the appropriate dissolution form to the Colorado Secretary of State. The specific form depends on your business structure:

• Corporations: File Articles of Dissolution.
• Limited Liability Companies (LLCs): File a Statement of Dissolution.
• Sole Proprietorships with a Trade Name: File a Statement of Trade Name Withdrawal.
• Foreign Entities: File a Statement of Withdrawal.

These forms are available online through the Colorado Secretary of State’s website.

Close all Payroll Accounts & Benefits:
Terminate all payroll-related accounts and ensure that employee benefits are properly closed or transferred. This may include:

• Wage Withholding Account with the Colorado Department of Revenue.
• Unemployment Insurance Account with the Colorado Department of Labor and Employment.
• Family and Medical Leave Insurance (FAMLI) Account through the state of Colorado.
• Workmans Comp Insurance accounts
• Transferring all employee benefits (e.g., health insurance, retirement plans, or other fringe benefits) to a new provider or notifying employees of termination and providing options for individual continuation.

Close all Sales Tax Accounts:
If your business was registered to collect sales tax in any jurisdiction, ensure you close those accounts. This applies to both state and local jurisdictions where you’ve filed sales tax returns. This may include:

• General account for Sales Tax, Gross Receipt Tax, Use Tax, Excise Tax, Retail Delivery Tax, etc.
• Be sure to include all state, county, city, and special district tax accounts

Cancel Other Licenses and Permits:
Terminate any additional business licenses, permits, or registrations to prevent future liabilities or obligations. Examples include:

• Professional licenses.
• Health permits.
• Zoning permits.
• Local business licenses.

Close Bank Accounts, Apps, Subscriptions, and Third-Party Software:
Once your business is dissolved, be sure to:

• Close all business bank accounts and credit cards to prevent unauthorized charges or fees.
• Cancel subscriptions to software, apps, and services you no longer need, such as point-of-sale software or project management tools.
• Notify third-party software vendors and deactivate any user accounts associated with the business.
• Transfer ownership or cancel subscriptions for services or tools tied to the business (e.g., domain names, email hosting).

File Final Tax Returns:
Complete and file all necessary, year-end tax documentation marking them as “final” where appropriate. This may include:

• All year end federal, state, and local tax returns for the business
• All year end payroll filings such as W-2’s, W-3’s, etc. for employees
• All year end 1099 filings for contractors, etc.

Cancel your EIN and close your IRS business account

The employer identification number – or EIN – assigned to your business is the permanent federal taxpayer identification number for that business. See here to cancel your EIN and close your IRS business account.