🎯 In 30 seconds: A business sells for more when its books are clean, its earnings are documented and it runs without you, and that takes a year or two of preparation. If you close instead, the order is: decide in writing, dissolve with the state, finish payroll and file final returns, cancel permits and registrations, then close the IRS account.
Preparing to sell (start 1–2 years ahead)
- Clean up the books. Stop running personal costs through the business. Every add-back is something a buyer may discount.
- File accurate tax returns. Buyers and lenders price off what you reported.
- Secure the lease. A renewal option or a longer term is often worth more than a new sign.
- Write things down. Procedures, supplier contacts, pricing, software logins. A business that lives in your head is worth less.
- Reduce dependence on you and on any one customer.
- Fix the obvious: deferred maintenance, expired permits, unresolved disputes.
Valuing it and finding a buyer
The SBA describes three broad approaches: income (what the earnings are worth), market (what similar businesses sold for) and assets (what the equipment and inventory are worth). For most owner-run businesses, buyers think in multiples of seller’s discretionary earnings (see the buying page).
Worked example: An owner shows SDE of $150,000 with three years of matching tax returns. At a multiple of 2.5 that suggests about $375,000. If $40,000 of the SDE is add-backs the owner can’t document, a careful buyer prices off $110,000 instead: 2.5 × $110,000 = $275,000. The paperwork was worth $100,000.
Brokers list the business confidentially, screen buyers and manage the process, usually for a commission on the sale price. Get the commission, the length of the listing agreement and what happens if you find the buyer yourself in writing. Many smaller sales happen without a broker, to an employee, a competitor or a family member.
Sales can be outright, paid over time (seller financing) or structured as a lease. Have a lawyer review the sales agreement, and list all assets and liabilities so nothing surprises either side later.
If you’re closing: the order of steps
| 1. Decide | Partners must agree; record the decision in writing. |
| 2. Dissolve | File dissolution with each state where the LLC or corporation is registered, or the state can keep charging fees and annual reports. |
| 3. Employees | Pay final wages on time under state law, make final federal tax deposits. |
| 4. Final returns | Income, payroll and sales tax returns marked final. |
| 5. Cancel | Seller’s permit, city license, DBA, state payroll accounts, professional licenses. |
| 6. Settle debts | Pay or negotiate with lenders and suppliers, especially anything personally guaranteed. |
| 7. Close the IRS account | Only after all returns are filed and taxes paid. |
The IRS closing checklist
- Final income return: sole proprietors file Schedule C as usual; partnerships file Form 1065 and check the final return and final K-1 boxes; corporations file Form 1120 or 1120-S marked final, and file Form 966 if dissolving or liquidating.
- Possible extras: Form 4797 for sold business property, Form 8594 if the business was sold, Schedule SE for self-employment tax.
- Payroll: final Form 941 (or 944) with the closing box checked and the date of final wages, final Form 940 for FUTA, W-2s to employees and Form W-3 to the Social Security Administration, Form 8027 if employees received tips.
- Contractors: Form 1099-NEC for anyone paid at or above the threshold in the closing year. For payments made in 2026 it is $2,000; the IRS closing page still shows the older $600, which applies to earlier years.
- Close the EIN account: send a letter to the IRS with the legal name, EIN, address and reason for closing, plus the EIN notice if you have it.
- Keep records: employment tax records at least 4 years; property records until the limitation period ends for the year of sale.
Free help with either path: your SBDC and SCORE mentor, listed in Main Street Business.