After making the choice to close your Texas business, there are several hurdles to jump through before it can be made official. In Texas, the process is called terminating your business, and it’s completed through the Texas Secretary of State. By completing every step of the termination process in full, you can be sure that your Texas business is wrapped up without hassle or complications.
Complete each of these steps to legally terminate your Texas business:
Step 1: Wind up internal affairs.
The Texas Business Organizations Code provides winding up procedures that businesses may follow to start the process of terminating a business. If you’ve made the choice to close your Texas business, it’s regarded as a voluntary decision to wind up the business.
In this case, you’ll typically need to hold a vote among the board of directors, shareholders, or members, depending on whether it’s a corporation, limited liability company, etc. You may need to submit written consent from all company shareholders to the Texas Secretary of State to officially terminate your business.
Once you have approval for termination from the authorized people within your company, you can proceed.
Step 2: Notify creditors of the intent to terminate.
You’re required to inform any creditors of your business of the intent to terminate in writing. This provides them with the opportunity to make any claims against your business so that you can pay them in a timely manner. In Texas, you’ll need to provide creditors with a deadline for claims to be submitted, as well as an address for claims to be sent to. It’s widely recommended that you complete this step with the help of an attorney to avoid legal liability.
Step 3: File final tax returns with the state of Texas and the IRS.
Your business needs to file final tax returns and pay any taxes owed prior to termination. A “Final Tax Return” checkbox is included on federal tax forms; you’ll check this box to indicate that your business is closing and will no longer be accountable to taxation.
Step 4: File a Certificate of Termination.
To terminate a business in Texas, you need to submit two signed copies of the Certificate of Termination to the Texas Secretary of State. You can find the required forms for your business on the Texas Secretary of State website, though you’re not required to use the forms provided.
You also need to attach a Certificate of Good Standing from the Texas Comptroller of Public Accounts to your Certificate of Termination. This certificate indicates that your business is in good financial standing and has paid its taxes in full.
Once your Certificate of Termination (with your Certificate of Good Standing) have been processed by the Texas Secretary of State, along with the filing fee, your business is officially closed. It generally only takes about five business days for the Certificate of Termination to be processed.
Step 5: Cancel permits, licenses, and contracts associated with your business.
Any permits, licenses, and contracts associated with your Texas business need to be closed to complete the termination process. If any property for the business is leased, contact your property owner to end the lease contract. You’ll also need to cancel business licenses and permits by contacting the appropriate Texas state agency.
Step 6: Distribute remaining assets to shareholders.
Once all taxes, fees, claims, and termination expenses have been fully paid, you can distribute the remaining company assets among shareholders. Assets include profits, financial investments, and physical property, and are typically distributed by ownership percentage.
Step 7: Inform employees and clients of the termination.
In the termination of a business, it’s important to inform employees and clients of the event as soon as possible. This will help you maintain positive relationships with people in your industry and in your community.
The steps above outline the process of terminating a business in Texas. By following these steps properly, you can avoid legal issues and other complications that could hinder the termination process.