We often talk about in business starting or creating a company, but there’s another side to that coin. It’s not something entrepreneurs often think about, but many times there comes the point where you want to close your business. Perhaps you had a revenue amount that you wanted to achieve before you cashed out and started on another project of interest, or maybe you’ve been doing it for years, and it’s time to get the business off your hands since no one in your family is interested in taking it over.
Whatever the reason for closing your business, there are a few things you have to make sure you keep in mind as you proceed in unwinding the company.
- Co-Owners: If you have any partnership and you’re looking to move out of the day to day, it goes without saying that you have to speak to any co-owners. Use the articles of organization and make sure you create a written agreement that will dissolve the company or sell it to your co-owners or someone else who will assume your part of the business.
- Accounts Receivables: If you’re a sole proprietor, and you’re looking to close your business, make sure your accounts receivable are all paid and up-to-date before you inform anyone that you will be closing the company. Once you have all your payments, you can then notify your clients that you will be closing the business.
- Notifications: Once you’ve gotten all of the revenue sorted, you need to close your accounts with any creditors. You’ll also want to complete dissolution papers and file those with the state where your company is located. If you have a rented office or business location, this is also the period where you will notify your office landlord and anyone else with whom your business is associated.
- Protect Your Tradename: When you’re in the process of making notifications, you still want to protect your brand name and image. Cancel any licenses, permits or registrations that are in the name of your business.
- Team Members: One of the toughest things to do, especially if you have an excellent team of people working with you, is to inform them that they will be losing their jobs. The best thing to do is to give as much notice as possible so people can prepare. If possible, offer severance packages, and make sure that you comply with the U.S. Department of Labor’s Worker Adjustment and Retraining Notification Act depending on the size of your business.
- Financial & Regulatory Obligations: If you have an inventory of any kind or assets, you’ll want to liquidate everything. You’ll also want to make sure that you are compliant with the state and federal tax authorities. Don’t forget to cancel your Employer Identification Number (EIN) with the IRS. For additional information about closing a business with the IRS, you can find that information here.
When you close a business, there’s a lot of work to be done, and many details to make sure are tied up. There are several resources that you can use to ensure that you have everything covered from a business and regulatory standpoint. One of the first places to visit would be the Small Business Administration, which has a great regulatory and compliance checklist for closing businesses. Another excellent source is NOLO, which also has a list for companies, which are more geared toward the business side of things.