Closing Down A Business: Everything You Need to Know
Closing down a business may seem hard to do but taking the proper steps will be helpful to you in the long run.3 min read
Closing down a business may seem hard to do but taking the proper steps will be helpful to you in the long run.
Helpful Steps for Closing Down a Business
- Accept the circumstances. It can be hard to come to terms that you may have to close your business. However, if your business has been suffering more loss than gain, it may be time to do so.
- Take time to reflect. It would be smart to take some time to think about what went wrong with the business. Some possible reasons could be lack of customers due to a recession or not enough demand for your product.
- Choose to vote to close the business. If you alone own your business, then this can be ignored. However, if there are others involved in the business operations, you may need to get their vote to shut down. A lawyer should be present during the dissolution meeting to act as a witness and document the agreement.
- Form an exit strategy. Creating this plan will help you avoid losing money. Some examples are:
- Take as much money from the business as you can legally.
- Sell all your assets through a liquidation, which can be used to pay off debts.
- File for Chapter 7 bankruptcy to have your assets sold by the court and pay off the debts you owe.
- Time it right. When would be the best time to close the business? If you have been struggling with money for six or more months, it's time to move on. If your health or other aspects besides financials are in trouble, you may want to shut down.
- Let your employees know. It's better to notify your employees once the decision has been made. If you have more than 99 employees, the Worker Adjustment and Retraining Notification Act states that you need to notify them through writing about the closing. The notice should be given at least 60 days prior to the business closing. Paychecks should be given to employees on their last day of work, and you may have to pay them for any unused personal time.
- Let your customers know. Make sure you notify them so they can place any last orders. You can also give them a list of other merchants who carry similar items and services.
- Let creditors know. All existing creditors should be notified. You may also get the chance to lower any business debts.
- Get rid of assets. Take pictures of what you have and write down any important information. Assets like leases and permits may be transferred to someone else, but you should speak to an intellectual property lawyer before doing so. Prepare all the items you want to sell by repairing or washing them or donate those that cannot be sold to get a tax deduction. An experienced appraiser may help you determine the value of many of your assets so that you get the most out of your sale. Choose the best date for the sale by determining if your items are seasonal or used year-round, and sell items at your current business location to avoid losing value on any of them.
- Fix your financials. On your business tax return, make sure you check off that it will be the final one filed. Let the IRS know that any forms regarding employment will not be filed due to the closing. The Employer Identification Number (EIN) will have to be closed. Take care of any debts or file for bankruptcy if the debts cannot be taken care of. All business accounts should be closed or canceled.
- Formally dissolve the business. Without doing so, you may be held responsible for any taxes and filings pertaining to the business. Cancel all licenses, permits, and registered business names. Keep tax and employment records for at least five years after shutting down.
- Accept and move on. Whatever the case may be, the business closing does not mean you failed. Accepting the circumstances may be hard, but it's best to move on.
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