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Closing a business can be hard for many reasons. Whether it is a financial, personal or legally-driven decision, the process involved can be both emotional and confusing. Paying off debts with bill consolidation, notifying the government and even sorting out your taxes can be tricky, especially for small business owners without access to professional advice. If you are a small business owner in need of some guidance, you have come to the right place. Below, we have developed a step-by-step list of the things you need to do when closing a business.
Step 1: File Dissolution Documents
The first step to closing down a business is to notify the government. If your business is an LLC or corporation, you will have to file dissolution documents in order to officially dissolve your organization. Sole proprietorships and partnerships do not usually have to follow this step, but it is still best to notify the government. This step is an important starting point for any small business owner to begin the closing process.
Step 2: Notify Your Creditors
The next thing you should do is notify your creditors, lenders, suppliers, service providers and utilities providers that you will be closing down. This will provide you with the opportunity to close your accounts and cancel subscriptions or services that you will no longer be needing. Some companies may even offer you pardons for outstanding payments. Calling all of these people can be overwhelming, so take the time to organize your list of creditors and services before you begin making calls.
Step 3: Sell Off Inventory
When closing a business it is important to find a way to sell off your inventory. Start by discounting products, especially those that are pricier, like Chicago Gourmet. Then, once you have announced that you will be going out of business, have a big sale and discount the products even further. Anything left behind can be sold online or to a third-party inventory liquidator. Hopefully, you will be able to recover some of your business losses by getting rid of all of your inventory.
Step 4: Collect Outstanding Accounts Receivable
You should definitely remember to collect any outstanding accounts receivable. Or, you can choose to sell outstanding accounts receivable to a factor. Either way, be sure to make those collection attempts prior to announcing that your business is closing. Otherwise, customers may not think they are required to pay you back. Make sure to email or call and ask for any and all outstanding payments before closing your business.
Step 5: Cancel Licenses And Permits
When you are ready to officially close up shop, it is time to cancel licenses, permits and business trademarks. This may also include property insurance or other similar policies. Go through your records and locate every institution that your business is registered with. You can cancel these by contacting the issuing authorities. Additionally, this would be the time to cancel your business insurance.
Step 6: Settle Your Debts
Before you can leave your business behind, you will need to settle any debts left in its wake. This includes paying your employees for their time, working with creditors to pay off what you owe and possibly filing for bankruptcy if you are unable to meet these financial obligations.
Step 7: File Your Taxes
The final step to closing a business is to file your taxes according to IRA rules. First, you must file your final tax return for your last year in business. Even if you were only in business for part of the year, this is a necessary step. Additionally, you should also file your final employment tax return. After you have completed this step, your business will officially be closed.
Closing a business can be a long and arduous process, particularly if you do not have proper guidance. It is important to remember to notify your creditors, file tax returns and settle your debts in order to avoid legal or financial troubles in the future, whether you own a telemarketing business or a tech startup. As long as you follow these steps above, you can close your business and possibly even reduce your losses.
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