How to File Form 2016 to Terminate a Texas Business

Formally ending a Texas-based business requires a legal process that culminates in submitting Form 651, the Certificate of Termination of a Domestic Entity. This document officially notifies the Texas Secretary of State that an entity, such as a for-profit corporation, LLC, or limited partnership, has concluded its affairs and seeks to dissolve. Filing this certificate is the final step in a multi-stage process that ensures all state obligations are met before the business is formally closed. The procedure is governed by the Texas Business Organizations Code, which outlines the requirements for winding up and termination.

Prerequisites for Filing the Certificate of Termination

Before a business can file a Certificate of Termination, it must demonstrate that its state tax obligations have been satisfied. The Texas Secretary of State will not process Form 651 without an accompanying Certificate of Account Status for Dissolution/Termination. This document is issued by the Texas Comptroller of Public Accounts and serves as proof that the entity is current on all taxes, most notably the franchise tax.

To acquire the certificate, the business must request it from the Comptroller by submitting Form 05-359, Request for Certificate of Account Status. This request can be submitted online through the Comptroller’s eSystems portal, which requires the entity’s 11-digit taxpayer number and its franchise tax Webfile number.

As part of the request process, the business must file its final franchise tax report. This report covers the period from the day after its last annual reporting period ended to a date within 60 days of the planned termination. Once the final report is filed and all outstanding tax liabilities are paid, the Comptroller will process the request, which can take four to six weeks. The resulting Certificate of Account Status is valid only through the end of the calendar year in which it is issued, making timely filing with the Secretary of State important.

Information and Documentation for Form 651

With the tax clearance certificate in hand, the next step is to complete the Certificate of Termination, Form 651. A fillable PDF version of this form is available for download on the Secretary of State’s website. The initial section requires identifying information, such as the legal name of the entity, its entity type, and its date of formation. Item 4 asks for the 10-digit file number assigned by the Secretary of State, which can be found on formation documents or through an online business search.

Item 5 requires the names and full mailing addresses of all governing persons. For a corporation, this would be the directors; for an LLC managed by managers, it would be the managers; and for a limited partnership, it would be the general partners. If an LLC is managed by its members, then each managing member must be listed.

Item 6 is a declaration of the event that caused the winding up, where the filer must select the applicable reason, such as a voluntary decision, the expiration of the entity’s duration, or a court decree. The “Effectiveness of Filing” section allows the entity to choose when the termination becomes legally effective, with the default being upon filing. Finally, the “Execution” section is where an authorized individual signs the document, certifying that the information is accurate and they have the authority to act for the entity.

The Filing Process for Form 651

Two copies of the signed Certificate of Termination must be submitted along with the tax certificate. The standard filing fee for the Certificate of Termination is $40. The state provides several methods for filing:

• Mail documents with a check or money order to the Secretary of State’s P.O. Box in Austin.
• Deliver documents in person to the physical address of the Secretary of State’s office in Austin. This method allows for payment by cash, check, money order, or credit card.
• Fax the completed form, along with credit card payment information, to the dedicated number provided by the Secretary of State.
• File online using the SOSDirect or SOSUpload portals. These systems allow users to upload the signed PDF of Form 651 and the tax certificate, with payment made by credit card, which is subject to a 2.7% convenience fee.

After submission, the Secretary of State’s office reviews the documents. If accepted, the entity’s status is officially changed to “Voluntarily Terminated” in state records, and the filer receives an acknowledgment. Standard processing can take several business days, but the Secretary of State offers expedited processing for an additional fee of $25 per document.

Post-Termination Responsibilities

The official termination of the entity’s legal status with the state does not conclude the obligations of the business owners. A series of “winding up” activities must be completed to properly close the business’s affairs, which involves settling financial matters, notifying interested parties, and distributing remaining assets.

A primary responsibility is the filing of a final federal income tax return with the IRS, as well as any other applicable federal returns for payroll or other taxes. These filings report all financial activity up to the date of dissolution and formally close the entity’s tax accounts with federal agencies.

The business must also address its outstanding liabilities. This involves sending written notice to all known claimants and creditors, informing them of the termination. All legitimate debts and obligations of the business must be paid or settled, including loans, supplier invoices, and lease obligations.

After all liabilities have been discharged, any remaining assets or property of the business can be distributed to the owners, shareholders, or members. The distribution must be made according to the rights and interests outlined in the company’s governing documents, such as an operating agreement or bylaws. Following asset distribution, practical steps like closing all business bank accounts, canceling company credit cards, and terminating any local or state business licenses and permits should be completed.

Finally, there is a requirement to retain business records after the company has been terminated. Financial statements, tax returns, legal documents, and employment records should be securely stored. Federal regulations often require keeping tax-related records for at least three to seven years to address potential future inquiries or audits.