How To Close a Business

It may be time to close your business if it’s no longer profitable or you’re ready to go somewhere else.Depending on the type of business, there are many legal requirements that need to be met to ensure that you are not held personally responsible for the business.Paying off your debts and filing taxes are some of the things you can do.

Step 1: You should review the status of your business.

Evaluate your business’s financial strengths and debt obligations before you decide to close it.If you can cut costs, the business will be more profitable.You should check to see if you can save money by changing vendors.Reducing costs can allow you to stay in business longer.

Step 2: Get help from a professional.

Before you make any final decisions about closing your business, you should speak with your accountant, lawyer and possibly other trusted business advisors.You want to make sure that you have exhausted all avenues for making a profit and that your accountant can explain the likelihood of turning a failing business around.Your lawyer can help guide you through all of the legal requirements if you still think you should close your business.This could include filing payroll taxes, corporate dissolution documents or other IRS forms.

Step 3: Corporate documents should be reviewed.

If you are a corporation, you must review your corporate documents to see what steps you need to take to get partner approval to close the business.The partners are required to vote on a dissolution.If there is a majority in favor of closing the business, then the company can move forward with paying its employees, filing its paperwork and settling its accounts.It’s important to follow the specific state rules for your business.You can find a state-by-state guide to dissolution requirements at: http://www.nolo.com/legal-encyclopedia/how-dissolve-llc-your- state.If the business documents of the corporation do not dictate the procedures for closing, you must review your state’s business statutes and follow any requirements.

Step 4: Contact the people you owe money to.

You have to notify your debts before closing your business.This will allow your creditor to calculate your debt and position themselves to collect it.You should tell your creditor how you intend to repay your debt before selling assets.

Step 5: There is money owed to the business.

Once you have decided to close your business, you want to make sure that you get as much money as you can in order to pay off your debts and hopefully walk away with some profit.Since you need to collect the outstanding debt as quickly as possible, it’s a good idea to call the debtor directly and ask them to pay.As an incentive for the debtor to pay you quickly, you can offer a discount.You should try to collect on the debt before you announce the business is closing.If the business is closing, a debtor may try to hold out on paying you.If you have a lot of accounts receivable, it’s a good idea to sell them to a company that buys them.These companies will aggressively pursue debt collection for their own company when they buy your debt at a reduced value.You don’t have to try to collect on any debt if you get access to funds quickly.

Step 6: Outstanding orders should be filled.

You must either fulfill your end of the bargain or try to negotiate to end your relationship early if you are under contract to provide certain goods and/or services.You have to try to reach a solution if you speak to your customers with outstanding orders.You can be sued if you don’t reach a compromise or complete the order.

Step 7: Sell your assets.

The process of selling your assets should begin with a thorough inventory.If you have to close the business quickly, you may need to offer significant discounts.You can sell your assets at an auction.If you want to sell the most inventory with the least amount of extra work and shipping costs, you can hold an auction on your business premises.Sell your stuff to a store.When these businesses sell your goods, they pay you a percentage of the sale.You can sell items online.EBAY is one of the places where people sell their goods.This may be a good place to sell smaller items.The sale cost may be prohibitive for many buyers if you have large pieces of equipment.

Step 8: Get rid of your lease.

If your business is renting space, you need to give the landlord notice when you’re ending your lease.If the landlord can’t find a new tenant, you may have to pay the entire lease.If you ended your lease before the new tenant moved in, you would be responsible for the rent.If the location is under high demand, some landlords may allow you to pay a fee to end the lease.Landlords may be willing to negotiate with you in order to get some payment for the terminated lease because you are closing your business.

Step 9: You should pay your employees.

You have to pay your employees what they are owed as the business ends.Wages or unused vacation time could be included.You might have to give employees a final paycheck within a certain amount of time.The U.S. Department of Labor has links to state agencies so that you can determine if you are eligible for final paychecks.Depending on the size of your business, you may be required to give employees a certain amount of notice before closing.60-days notice is required for companies with 100 or more employees.

Step 10: The payroll taxes should be filed.

You need to submit employees’ taxes to the state and federal government on time.Failure to submit these taxes could result in a penalty equal to the amount owed and the government can seize assets.

Step 11: Pay your debts.

When you have sold all of your assets, you must pay your debts.If you have few assets, your creditor may be willing to negotiate a debt settlement with you.You should have received your creditor’s claims since you notified them.If you want to start paying off your debts, you should first pay your secured loans.Outstanding bills can be paid off with business credit cards.

Step 12: Pay your taxes.

You have to file state and federal tax information.The IRS created a list of things to look out for when closing a business.The closing-a-business-checklist can be found at theirs.gov.You should talk to your accountant about which taxes you have to pay.Federal and state income taxes.Business tax returns are required of employers.Employees have pension plans and Social Security and Medicare.

Step 13: Remaining assets should be distributed.

If you have funds left after paying your debts, you can distribute them to the business owners and partners.Setting money aside to repay debt is something you should consider doing.You should follow the company’s organizing documents when distributing funds.

Step 14: Shut off utilities and close all accounts.

Inform utility companies that you want to stop services if you haven’t already done so.All business accounts should be closed once final distributions have been made.

Step 15: You should keep a copy of your records.

You have to keep your business records for several years after you close.You can defend against any claims that may arise.You should keep your records for at least 7 years according to the Small Business Association.