Virtual General Counsel LLC
Virtual General Counsel LLC

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What are the requirements for winding down a business?

| Jul 6, 2018 | Business Formation |

When individuals in Denver join forces to form partnerships, they often see years of success as their business grows over time. However, the time may come where partners want to dissolve their business. They may each want to go their separate ways as they pursue new business opportunities, or they may simply be ready for retirement. Whatever the reason, when it comes to winding down a business, there are steps that need to be followed to ensure all the proper legalities are fulfilled.

First, if the partnership has a written partnership agreement, any rules regarding dissolving the business included in the written agreement should be strictly followed, along with any relevant state laws. If the general partnership filed with the state of Colorado as part of the business formation process, then it must also file dissolution documents with the state of Colorado.

When a partnership is winding down, it still must pay all applicable taxes for both the past and current year. This means continuing to deduct taxes from paychecks and filing quarterly and annual taxes with the state and Internal Revenue Service. Keep in mind that certain forms need to be filed within a certain amount of time from the closing date of the general partnership. Business licenses will also have to be cancelled.

The partnership’s creditors will also have to be notified of the dissolution. Following that, any claims creditors send to the business will need to be accepted or rejected, as long as it is for a valid reason. It is important to follow Colorado law in such respects. Also, the partnership will also need to collect any funds others owe to the business.

Other stakeholders, such as employees and landlords, will need to be told of the closing of the business. Finally, once creditor claims have been settled, the remainder of the business assets will need to be sold, and distributions made in proportion to each partner’s stake.

As this shows, the winding down of a general partnership takes more than simply locking the doors and taking the sign down. There are legal requirements involved. If they are not followed, it could lead to personal liability on the part of the partners. Therefore, it is important for partners wishing to end their business to make sure they understand all that is required of them.