Winding down
How to wind down a company or shut down a startup
Winding down a company, or shutting down a startup, is one sequence: decide, get approval, stop new obligations, settle employees and contracts, export records, file the final taxes, dissolve with the state, and distribute what remains. Federal WARN is a notice statute with a covered-employer test, and state notice and final-pay rules differ. Canceling a subscription is the step you cannot undo, so export the workspace before you stop paying.
Does my company qualify to sell its data? Confirm that before a license is part of the close.
| Topic | Federal rule |
|---|---|
| Covered employer | 100 or more employees, excluding part-time employees, or 100 or more who together work at least 4,000 hours a week, exclusive of overtime. U.S. Government Publishing Office |
| Plant closing | A shutdown of a single site, or of a facility or operating unit at that site, if 50 or more employees lose employment in any 30-day period, excluding part-time employees. U.S. Government Publishing Office |
| Mass layoff | Not a plant closing. In any 30-day period: at least 33 percent of the employees and at least 50, or at least 500, excluding part-time employees. U.S. Government Publishing Office |
| Notice period | 60 days after written notice, before the closing or layoff. U.S. Government Publishing Office |
| Who receives notice | Employees or their representative, the state rapid-response designee, and the chief elected local official. U.S. Government Publishing Office |
| Employment-tax records | Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later. Internal Revenue Service |
| Income-tax records | 3 years ordinarily. 3 years from filing or 2 years from payment, whichever is later, for a refund claim. 7 years for worthless securities or bad debt. 6 years if omitted income is more than 25% of gross income. Indefinitely if no return is filed or the return is fraudulent. Property records until the limitation period for the year of disposal. Internal Revenue Service |
| Final federal return | You must file a final return for the year you close your business. Internal Revenue Service |
| State responsibilities | Remember to check your state responsibilities when closing a business. Internal Revenue Service |
| Contractor reporting | Report contractors paid at least $600 for services, on Form 1099-NEC. Internal Revenue Service |
| Delaware continuation | 3 years after dissolution, or longer if the Court of Chancery directs, to sue, be sued, and wind up. Not to keep operating. Delaware Code Online |
Decide whether it is time to wind down
A wind-down and a startup shutdown are the same sequence. Dissolution is the filing at the end, not the first step.
Runway is gone, or a buyer for the whole company has not appeared. Read how to sell a failed startup if a counterparty is still real. If that sale is not moving, decide in a board meeting and write down what the company can still pay.
Get board and shareholder approval
Do not shut the company down on a founder's email. The board has to act, and many corporations also need a stockholder vote. Who must vote is the charter plus the statute of the state of formation. Read both before you count heads.
Call the board meeting the way the bylaws require. The resolution should say the company will wind down, name who will run the work, and stop new obligations that the company cannot finish. If the charter or the statute also requires stockholders to vote, notice that meeting the same way. Investor notice comes after the board acts, in the way the stockholders' agreement requires.
Delaware corporations look to the Delaware statute for dissolution. See how to dissolve a Delaware corporation for the filing steps. The charter can set a higher bar than the statute, so count the vote from the charter and from the state of formation.
Keep the minutes. Later filings will ask who authorized the wind-down.
Stop taking on new obligations
The first operating move is to stop creating obligations the company cannot finish.
Freeze new hires, new annual contracts, and new debt. Tell the people who can sign those documents that the freeze is in force. Existing contracts are not canceled by the freeze. They are identified, assigned to a named person, and put on a list with the end date and the unpaid amount.
Stopping new spend does not decide whether you can license the records. Is it legal to sell company data to AI companies? Read that before anyone offers a copy of the workspace as a way to raise cash. The freeze does not cancel the tools that still hold the records.
General information only. This is not legal, tax or financial advice.
Settle employees, including federal WARN
Federal WARN is a notice statute for covered employers. It does not set the final paycheck. State notice rules depend on where the employees work. Federal notice rules are named, without the state table, under the WARN Act in the company wind-down and data licensing glossary.
The WARN Act helps ensure advance notice in cases of qualified plant closings and mass layoffs. U.S. Department of Labor The covered-employer, plant-closing, and mass-layoff tests are in the federal rules, including the 100-employee count and the 4,000-hour count. Workers on temporary layoff or on leave who have a reasonable expectation of recall are counted as employees. eCFR
Written notice runs for 60 days. Serve the employees or their representative, the state rapid-response designee, and the chief elected local official. Notice also must be served on the State dislocated worker unit and the chief elected official of the unit of local government within which a closing or layoff is to occur. eCFR
The statute lists three conditions that can change the 60-day period. For a natural disaster, it says no notice is required. If one of the exceptions applies, the employer must give as much notice as is practicable, which may in some circumstances be notice after the fact, and must give a brief statement of the reason for reducing the notice period. eCFR
WARN does not preempt any other Federal, state, or local law, or any employer agreement that requires other notification or a benefit. U.S. Department of Labor See final paycheck and WARN rules by state when closing a business.
If your employees work in one of these states, start with that state's employer rules.
- closing a business in Delaware with employees
- closing a business in California with employees
- closing a business in New York with employees
- closing a business in Texas with employees
- closing a business in Florida with employees
- closing a business in Washington with employees
- closing a business in Massachusetts with employees
- closing a business in Illinois with employees
The announcement itself is a separate task. Read how to tell employees the company is closing before the all-hands.
Build a business closing checklist by state when you want the tasks for one state in order. Read does the WARN Act apply to my company before you set a notice date.
Close out customers and contracts
Customer contracts and customer records are different problems. List the contracts. The records have their own rules.
Assign one person to list customer contracts, vendor agreements, and leases. For each row, write the counterparty, the end date, the unpaid amount, and who inside the company owns the relationship. Do not use the list as a plan for breaking a contract. Ending a contract early is a negotiation or a clause, and your lawyer should read that agreement.
Customer personal data is not handled by finishing the commercial contract. Read what to do with customer data when closing a business for that duty.
A license of company records never includes names, emails and phone numbers; customer and staff details; or passwords and legal files. Read what data is shared when licensing company data. The contract list and that excluded list should not be stored in the same spreadsheet column.
Export software data before you cancel
Canceling a tool is the step you cannot undo. Export the workspace before you stop paying, then read that tool's own deletion page. Each vendor deletes or locks data on its own schedule. Export before you cancel.
The export is the mail, the files, the chat history, the project tracker, the finance system, and the support desk, plus any admin log you will need for the tax filings and for a fight about what the company owed. Name a person for each system. That person exports, checks that the export opens, and stores it where the company can still reach it after the subscription ends. List each system on the company records inventory template before you export.
Read what happens to company data when you cancel software before you stop paying.
- Asana
- ClickUp
- Confluence
- Dropbox
- GitHub
- Google Workspace
- HubSpot
- Jira
- Microsoft 365
- monday.com
- Notion
- QuickBooks Online
- Salesforce
- Slack
- Xero
- Zendesk
- Zoho Workplace
When will my software data be deleted after canceling? Check the date before you stop paying.
Vendor deletion windows compared shows how long each system keeps data after you cancel.
The cross-vendor list, before any subscription is canceled, is what to do before canceling software when closing a business.
Read what to do with company data when closing a business before you license the export.
Other positions, from a company that has already stopped to one that is still operating, are in what to do with your company's records in your situation.
Choose what records to keep
Keep the records the IRS tells you to keep. Do not license names, contact details, passwords, or legal files.
| Record | Keep, export, or do not license | Why | Source |
|---|---|---|---|
| Employment-tax records | Keep | Keep them for at least 4 years after the tax is due or paid, whichever is later. | Internal Revenue Service |
| Income-tax support | Keep | Keep support for income, deductions, and credits until the limitation period for that return ends. | Internal Revenue Service |
| Workspace export | Export before you cancel | Each vendor deletes or locks the workspace on its own schedule. | Systems directory |
| Names, emails and phone numbers | Do not license | Personal details are removed before anything leaves your company. You can hold back anything else too. | What is never shared |
| Customer and staff details | Do not license | They stay out of the copy. | What is never shared |
| Passwords and legal files | Do not license | They stay in the company's own custody. | What is never shared |
Employment-tax records and income-tax support follow the IRS periods in the table. A workspace export is not an IRS period. It is the copy you make before a vendor locks the account. Customer details, staff details, passwords, and legal files stay out of any license. Read what is never shared before someone offers a folder of HR files or a password manager as part of a data deal.
File final taxes and returns
The federal close is a final return and the employment-tax filings for the year you stop. It is not the same act as dissolving with the state. You must file a final return for the year you close your business. Internal Revenue Service The form depends on the type of business. The IRS closing page walks them in this order.
A sole proprietor files Schedule C. A partnership files Form 1065 and checks the final-return box and the final K-1 box. A corporation files Form 1120 or Form 1120-S and checks the final-return box. An S corporation also checks the final K-1 box. A corporation, or a farmer's cooperative, files Form 966 if it adopts a resolution or plan to dissolve the corporation or liquidate any of its stock. Internal Revenue Service File Form 966 if the corporation adopts a resolution or plan to dissolve or to liquidate any of its stock. You may also need Form 4797 for property used in the business, and Form 8594 if you sell the business.
Pay final wages, make the final federal tax deposits, and file Form 941 or Form 944 for that period. Check the box that the business has closed and enter the date final wages were paid. Attach a statement naming who keeps the payroll records and where. File Form 940 for that calendar year and mark it final. Issue Form W-2 and file Form W-3. If employees receive tips, file Form 8027. Pay the tax you owe. Report contractors paid at least $600 on Form 1099-NEC. Paper copies go with Form 1096.
The employer identification number is permanent. To close the IRS business account, send a letter with the legal name, the EIN, the address, and the reason, to the address on the closing page. The account stays open until the returns are filed and the taxes are paid.
Remember to check your state responsibilities when closing a business. Internal Revenue Service Employment-tax records follow the four-year period in the federal rules. Accountants who help clients through this filing order can read helping clients close a business.
Dissolve the company with the state
Dissolving is the state filing that comes after employees, taxes, and records. The form and the fee depend on the state of formation. Do the wind-down work above first. A certificate filed while payroll, taxes, or the record export is unfinished does not finish those jobs.
The state of formation is the state on the charter, which may not be the state where the team sits. File there. If you want a service to file the shutdown, read SimpleClosure vs Starcycle for what each one says about price and scope. See wind-down rules by US state. A company formed outside the United States follows a different statute. Read how to close a company in another country.
Keep the acceptance the state sends. That date is what later distributions rely on.
Make final distributions
What is left is distributed only after the company has dealt with creditors, and only in the order the governing law describes. Do not pay stockholders ahead of known claims. The person running the wind-down should have the claim list, the cash left, and the approval minutes in one place.
Delaware only: a dissolved corporation continues for 3 years, or longer if the Court of Chancery directs, so it can sue, be sued, and wind up. It may not keep operating. Delaware Code Online
If a creditor process is already open, the distribution follows that process. Read selling company data in bankruptcy before anyone licenses records out of an estate.
A license of records, or a sale of assets, can change what cash is left. It does not skip the creditor step. When the cash is gone and the claims are provided for, the remaining distribution is a board act under the charter and the statute, not a founder's transfer.
Use a wind-down timeline
Follow the steps in this order. Only a cited time is a statutory deadline. A sale or a license can start earlier, and neither one replaces these steps.
| Step | When, relative to the decision | What done means | Source |
|---|---|---|---|
| Decide | Before you tell employees | The board knows the runway and that a whole-company buyer is not in hand. | The board's own facts |
| Board and stockholders | Before new obligations stop | Minutes show the board acted, and stockholders voted where the charter or statute requires it. | The charter and the statute of formation |
| Stop new obligations | Before you sign another annual contract | Hiring, new annual contracts, and new debt are frozen, and existing contracts are listed. | The contract list |
| Employees and WARN | 60 days' written notice | Covered employers have served the written notice, and final pay follows the state rule. | 29 U.S.C. § 2102 |
| Customers and contracts | Before you tell customers the company has vanished | Every customer contract, vendor agreement, and lease has a named person. | The contract list |
| Export software | Before you cancel a tool | Each workspace export opens, and a person can still find it after the subscription ends. | The vendor's own help center |
| Records to keep | Before you discard a file | Employment-tax and income-tax records are retained for the IRS periods, and a license takes none of the excluded categories. | Internal Revenue Service |
| Final taxes | For the year you close | The final return is filed, employment taxes are reported, and contractor information returns are filed. | Internal Revenue Service |
| State dissolution | After the state accepts the filing | The state of formation has the dissolution on file. | The state of formation |
| Final distributions | After creditor claims | What remains is paid in the order the governing law describes. | The governing statute |
| Recover value | Can start earlier. It does not replace the other steps. | A sale or a license may bring cash in. The other steps still happen. | A sale or a license |
Recover value before you close
Recovering value is a parallel line, a sale or a license of records, and neither one skips the wind-down steps. A license does not replace a sale, and a sale does not replace this sequence.
If a buyer is still possible, read options when a company can't be sold. To license the records, read how to sell company data to AI companies. Or wind down with neither, and still finish employees, records, taxes, and the state filing.
A buyer who appears late does not erase a notice already owed to employees, and a license does not dissolve the company.
Related
- How to sell company data
How to sell or license company data to AI companies, and which route fits.
- Selling a company
How to sell a failed startup, and the options when a company cannot be sold as a whole.
- What's shared
Which records can be licensed, which details never leave, and what you approve.
- Is it legal?
What GDPR, US rules, and bankruptcy law say about licensing company data.
- Wind-down rules by US state
Final paycheck deadlines, state WARN notice, and dissolution fees for 51 US jurisdictions.
- Closing a company by country
Dissolution or liquidation route, registry, employee notice, and data-protection authority by country.
- Systems
What common business tools do to company data after you cancel, including each vendor deletion window.
- Guides
How-tos and lists for closing a company, selling one, or licensing its records.
Questions about winding down a company
How long does it take to wind down a company?
There is no single statutory duration for the whole sequence. Do the work in this order: decide, get approval, freeze new obligations, settle employees and contracts, export records, keep what the IRS describes, file the final taxes, dissolve with the state, and distribute what remains. The WARN notice period for a covered closing or layoff is 60 days after written notice. How fast a state accepts a filing depends on that state.
Does the federal WARN Act apply when a startup shuts down?
It applies when the employer meets the covered-employer test, not because the company is a startup. The test is 100 or more employees, excluding part-time employees, or 100 or more who together work at least 4,000 hours a week, not counting overtime. Written notice is due 60 days before a covered plant closing or mass layoff, and it goes to the employees or their representative, the state rapid-response designee, and the local chief elected official. Do not rely on an exception without your lawyer.
Which company records do we have to keep after we close?
Keep employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later. Income-tax support is 3 years in the ordinary case, 6 years if omitted income is more than 25 percent of gross income, and 7 years for a bad-debt or worthless-securities claim. Missing or fraudulent returns are kept indefinitely. Exporting a workspace is a separate act, and it is not one of those IRS periods. Match each file to the period that applies to it before you discard it.
Should we cancel our software before we dissolve the company?
No. Export the workspace first. Dissolution is a later filing with the state of formation, after employees, contracts, records, and the final federal taxes. Canceling a tool is the step you cannot undo, because each vendor deletes or locks data on its own schedule. Read the export section before you stop paying for the systems that hold the work. A canceled subscription is not a substitute for the state filing.
Can a company recover money while it is winding down?
A sale of the company, or a license of its records, can run beside the wind-down, and neither one replaces the sequence. A license does not find a buyer for the equity. A sale does not erase the federal filings or the state dissolution. Creditors come before any distribution of what remains. Read how to sell a failed startup if the route is a sale. Read how to sell company data to AI companies if the route is a license. Neither is a promise of a payout.
Do we need a lawyer to dissolve a company?
Yes. Ask your lawyer to read the charter and the dissolution statute before anyone files. Approval and dissolution depend on the statute of the state of formation and on the charter. Many corporations need a board vote and a stockholder vote, and the charter can set a higher bar. We do not act as your lawyer, and we do not recommend a law firm.
Sources
- U.S. Government Publishing Office. 29 U.S.C. § 2101. Checked 2026-11-04
- U.S. Government Publishing Office. 29 U.S.C. § 2102. Checked 2026-11-04
- eCFR. 20 CFR 639.3. Checked 2026-11-04
- eCFR. 20 CFR 639.6. Checked 2026-11-04
- eCFR. 20 CFR 639.9. Checked 2026-11-04
- U.S. Department of Labor. Employment Law Guide: Notices for Plant Closings and Mass Layoffs. Checked 2026-11-04
- U.S. Department of Labor. WARN Act Compliance Assistance. Checked 2026-11-04
- Internal Revenue Service. How long should I keep records?. Checked 2026-11-04
- Internal Revenue Service. Closing a business. Checked 2026-11-04
- Internal Revenue Service. About Form 966, Corporate Dissolution or Liquidation. Checked 2026-11-04
- Delaware Code Online. 8 Del. C. § 278. Checked 2026-11-04
- Vetrix Labs. What is never shared. Checked 2026-11-04