There are several steps to start closing a business with debts. When closing, a business typically has several debts. These debts are often to landlords, inventory suppliers, or banks. As a business owner, you should notify these creditors of your impending closure to limit your business liabilities. This way, you can make plans to repay the debts in full, settle for less, or declare bankruptcy. Read on to discover how to start closing a business with debts.
Make Decision To Close
Deciding to end your business is the first step to closing one with debts. There are several free financial analysis tools and websites you can use to help determine if closing your business is the best course of action. Additionally, seek advice from a lawyer or other business professional such as a banker or accountant employee. From there, file dissolution documents to end your business’s tax and filing obligations. Surely, making the initial decision to close your business is a complex, difficult determination that drives the rest of the process.
Legal Shutdown Preparations
Next, make several strategic shutdown preparations regarding how you will liquidate assets, lay-off staff and pay back creditors. Start by seeking professional advice from a broker or lawyer. When combined with the proper counsel, many online resources help you legally cancel registrations and permits. Additional resources assist you in meeting the tax-related requirements of closing your business. This way, you end your business operations in a legal way that saves costs as well as avoids fees, fines, and potential jail time. Absolutely, you should make legal shutdown preparations ahead of time. There are many more details to consider, such as paying creditors and closing customer accounts. Next, consult the various online tools detailing how to file dissolution documents and cancel various permits in your location. This way, you maintain compliance with often varying local laws. Absolutely, make strategic shutdown preparations such as laying off staff and closing customer accounts to terminate your business’s contracts.
Sell Assets At Fair Market Value
Third, sell off your assets at a fair market value. Typically, there are three kinds of assets to liquidate a business: security deposits, real estate leases, and various liquid assets such as inventory as well as intellectual properties. Itemizing a list of assets is often helpful. The most liquid assets should be sold at fair prices as soon as possible. For security deposits, consider if they can be recovered by terminating a lease or finding subletters. Additionally, determine if your real estate is in desirable location or significantly below market value. Certainly, sell your assets at fair prices to offset your business debts.
The fourth step in closing a business with debts is resolving various financial obligations. Typically, these obligations include taxes, creditors and landlords. When filing tax returns for the business’s last year of operation, check the box indicating the final return. You are also obligated to pay payroll taxes. Finalize the process by closing your Employer Identification Number. Then, pay off your business credit cards and lenders as much as possible. If possible, pay your rent or negotiate with your landlord to get out of your lease. Definitely, you should resolve as many financial obligations as possible prior to closing the business.
Avoid Personal Liability
Lastly, avoid personal liabilities when closing your business. Keeping your business and personal finances separate is an imperative step toward this goal. By using corporate or trust funds for personal bills or vise versa, you open yourself to legal challenges to the business’s existence. These challenges could potentially result in courts deeming your business invalid, causing fines, fees, and garnishments to your bank accounts. Of course, keeping your business and personal finances and accounts separate is important in avoiding personal liabilities when closing a business.
There is a myriad of ways to close a business with debts. First, consult various professionals and websites to make the often difficult decision to close. Second, make legal strategic shutdown preparations such as laying off staff and closing consumer contracts. Third, sell off your various assets to offset your business’s debts. Next, meet as many financial obligations as you can, prioritizing payroll and other business related taxes first. Finally, avoid personal liability by maintaining a degree of separation between business and personal finances. When wondering how to close a business with debts, consider the steps described above.