How To Properly Terminate Cottage Food Business

Business By KMKakes Updated 22 Jul 2016 , 6:09pm by KMKakes

KMKakes Posted 28 May 2016 , 7:16am
post #1 of 10

I am wondering, how do I terminate my cottage food business? Do I nwe'd to file certain paperwork to my city & county health department, courthouse, city hall, and with the irs? Believe it or not, in my small rural AL town where it was hard to get information regarding how to start up cottage food business, no one is quite sure of all of the departments that I will need to contact about properly terminating my business.   

9 replies
KMKakes Posted 28 May 2016 , 7:23am
post #2 of 10

Also, are there any penalties that I may encounter with the business being a few months shy of going into its 3rd year? Could it possibly affect my taxes if I have not received much business or income during the last 6 months? Will it reflect any of my supplies/appliances that are listed with the tax assessor's office?  If anyone has gone through this process, please help?

-K8memphis Posted 28 May 2016 , 12:51pm
post #3 of 10

here in my area, the only things that needed formalized action were the state tax id needed cancelled, the city and county business licensure needs cancelled and city/county tax canceled too pretty sure and of course your insurance which would be obvious so you don't have to pay the upgrade anymore --

but it's different everywhere -- idk if you even ever had to sign up for those entities where you are kwim

hope this is a happy break up and that you are healthy and wiser for having had the business in the first place with a lot of sweet peace to follow your decision to close -- as soon as you figure out how that is :)

but your agencies there will contact you if you've left some strings attached -- anything you paid for yearly, any tax you collected has to be cancelled on purpose -- even if little to no business was conducted

best to you

costumeczar Posted 28 May 2016 , 4:09pm
post #4 of 10

You should just get in touch with every office that you pay anything to or are registered with to let them know that you're closing and to file whatever paperwork they need to verify that. There's usually a form that you need to fill out or a box to check off with people telling them that the business has closed. The IRS has this checklist, a lot of which won't apply to you, but it shows you the process that you need to follow. https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business-checklist

And here's the list from Alabama, which I thought to look up after the IRS...I don't know how much of this applies to cottage law but it might:  http://revenue.alabama.gov/publications/business-taxes/Business--How_to_Close_a_Business.pdf

KMKakes Posted 29 May 2016 , 8:19am
post #5 of 10

Also, are there any penalties that I may encounter with the business being a few months shy of going into its 3rd year? Could it possibly affect my taxes if I have not received much business or income during the last 6 months? Will it reflect any of my supplies/appliances that are listed with the tax assessor's office?  If anyone has gone through this process, please help?

-K8memphis Posted 29 May 2016 , 1:11pm
post #6 of 10

yes i've closed several businesses -- sure all those things come into play -- you just have to be careful to close down properly -- yes it all matters -- not sure how to answer you regarding your particular circumstances and particular rules and regulations -- it depends on if you're sole proprietor or llc and what your other Income may be and ten thoudsand other variables -- you gotta take it one step at a time -- and do it right 

-K8memphis Posted 29 May 2016 , 1:18pm
post #7 of 10

you're not penalized for not being successful if that's what you mean -- but you can incur penalties for not shutting down properly 

-K8memphis Posted 29 May 2016 , 3:37pm
post #8 of 10

ok i got it -- just go backwards and undo everything you did to open in the first place


bam

kakeladi Posted 31 May 2016 , 12:21am
post #9 of 10

In CA we had what I called a "spatula tax" - I had to pay taxes to the city/county? on my equipment.  That had to be cancelled.  I didn't and some 6/9 months later they billed me and even though I fought it I still had to end up paying it :(

KMKakes Posted 22 Jul 2016 , 6:09pm
post #10 of 10

@kakeladi- thank you for answering. I will look into the spatula tax. I know that each year, I have to report all of my equioment, etc.

@K8memphis- thank you for your responses. I wondered about working in reverse order of how I registered everything for the business, yet i wasn't sure of any other formalities that may exist after the business was in effect.

-I am operating as sole proprietor and may income became under $100-$150 per month with other cottage food businesses opening in my small town, and with individuals not registered as a legal business of any sorts grossly under bidding mine and others pricing. I cannot compete when some of the individuals actual complete decent work. The nearest town/city is 35 minutes away. I have sold in those areas, yet people feel like I am being "put out" to have to deliver or meetup with them from so far. I have tried bazaars, farmer's market, etc. with sales and exposure to be minimal. However, I will sell out at those events and people love my products (cupcakes, cookies, pies, etc.) enough to come back at the next event to purchase from me. I have even posted flash sales on various social media outlets to make money off of the sales yet i have had some clients mention that they will only purchase when the prices and quantity are lowered during a flash sale-to which they wonder why are the normal prices so high.  So all of that was said to reflect that it is a sad and bittersweet breakup. If only I lived 35 minutes from here to have a somewhat more prosperous business. I feel like it is costing my family more paying insurance, license fess, etc. When hardly any funds are being made each month.

@costumeczr- thank you for your response. I will most certainly look into the information provided in the links that you posted. 

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