Notes on Shutting Down an S-Corp

A little over a year ago I described how I have my businesses set up in My Miniature Corporate Empire. Between then and now quite a few things have changed, the biggest being that I'm now employed by egghead, which had previously been my primary consulting client.

Over the past few months it's become very clear to me that this W-2 gig is better in every practical way than how I had been operating. There's no management overhead and far less worry about whether the next paycheck is going to happen. The management overhead is still there, however, because the businesses still exist. They're still sucking down energy and occupying mindshare that could better be used for, oh I dunno, chilling with my family.

Therefore, I'm shutting them down. My remaining consulting client will switch me to 1099 status and the publishing business just keeps going with less overhead.

This post is a checklist of things that I have to do to shut down my two Michigan LLC S-corps. It may not entirely apply to yours, or there may be other steps that you need to take. Consulting with your accountant if this is something you're thinking of doing.

Contract Assignment

First, I have to assign my consulting contract from Okapi LLC to myself personally. This is pretty simple, since there's no legal requirement for a form or anything, and my contract specifically allows assignment with notice and consent. I emailed my client, said "hey this is happening on this date" and asked for acknowledgement. Done.

I also need to figure out what happens with the copyrights for my books, websites, and code, but ultimately it should all come back to me. It's just a question of whether I need to do anything formal.

Redirecting Income and Expenses

Next, I need to redirect income and expenses. I opened a new bank account for my sole proprietorship and told PayPal, Stripe, and Dwolla to push payments there. The account comes with a debit card which I'll be using for all of my business expenses, which are pretty limited. Twilio, GitHub, AWS, and Heroku are the biggest offenders there.

Forms

Then there comes the glorious paperwork. Here are all the forms that have to get filled out and mailed in:

  • Articles of Dissolution for both LLCs. Fileable online with the state.
  • Forms 940 and 941. These tell the IRS to close my payroll accounts.
  • Forms W2 and W3. These tell the Social Security Administration how much I paid myself this year (not much).
  • Form 966. This tells the IRS about the dissolution of the S-corp.

In addition, I'll need to do a final tax return for the parent company. This should hopefully be straight forward since there wasn't much income and nothing tricky like health insurance or retirement contributions.

Closing Accounts

Once all of the above is settled I'll close each company's bank and credit card accounts. Not hard, but it'll involve a few phone calls and a visit to the bank. I expect this won't be happening until late summer because I don't want to do it until everything is settled.

Operating as a Sole Proprietorship Again

Our 2018 taxes will still be a tiny bit complicated because we'll have a simple K-1 from the parent business, but after 2019 forward it'll be smooth sailing. If for some reason I decide that consulting is something I want to do again full time, spinning up a new S corp is simple now that I've done it a few times. I might even use Stripe Atlas next time, since it comes with a bunch of perks and they do almost everything for you.


There's a certain amount of mourning that goes along with this whole thing. I'm slowly acknowledging that thigns didn't turn out how I had planned, but also recognizing that that's ok. Change is good.

4 Jun 2018   Share:           

Posted in: Business  

Tagged: Business

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