How To Close Your Business
There is a plethora of information about how to open, sustain, and grow your business. But sometimes things happen that lead us to consider closing up shop. It might be that you are currently trading at a loss, or that you have had a personal change in circumstances. Whatever it is, there is no shame in closing a once-thriving business, and actually, it can be one of the most healthy things that you do for yourself.
So, where do you start?
You have to be sure that you are doing the right thing for you. If you are making a spur of the moment decision based on a bad day, then it is better to take a step back and look at the situation. It might be that you actually need a break, rather than to break up with your business. However, if you do find that you are struggling to pay for stock, and not making an income enough to live on, then it might be time to call it a day.
If you are a smaller business, then you may well have fewer steps to follow. If you are in a partnership or you have a board, you’ll need to get permission from them all to make the closure. Work with partners, stakeholders, and develop an exit strategy.
You would do well to consider help from a lawyer, your accountant, bank manager, and qualified tax professionals.
The more detailed the plan, the more likely everything will be wrapped up properly.
This might be one of the hardest conversations you will have to have. But it would be best if you planned at which point you are going to tell your employees that you are closing the business.
You will need to decide whether you tell your employees nearer to the closing date, which gives less chance of them leaving you in the lurch or give them ample time to arrange for new employment elsewhere.
It is likely that if you do need to sell some of your assets and your staff will notice. You will not have as much of a discussion as you would perhaps like. Consider the relationship that you have with your employees, and that should be a good indicator of how you can handle the situation best.
Remember that you will still need to make sure that they have the final pay. Then they should be reimbursed for any out-of-pocket expenses that they have incurred. You will also need to collect any of the business property like mobile phones, computers, laptops, cars, tablets, and uniforms.
Collect Outstanding Accounts Receivables
The chances are you will have some outstanding accounts receivable, and you will need to employ an aggressive collection strategy. Once you close the business for good, it will almost be possible to collect any of these accounts receivable. Some business owners will be a lot less inclined to pay you when you are no longer doing business.
Their accounting practices might also not allow them to pay an individual rather than a legal business entity. When you close your business, you will no longer have legal standing to collect any of these receivables.
You should consider the fact to collect your outstanding accounts will give you cash on hand, which will be very helpful as you’re preparing to close.
You should make collections attempts long before you announce that you are going to close the business; otherwise, customers may feel like they do not have to pay you, or they will stall until after you have closed the doors.
Rather than sending a collection letter try to call the customers individually or visit them in person asked for payment.
For balances you can’t collect, consider selling them to a factoring agency they will purchase your unpaid invoices at a discounted rate; you will at least get some cash in your back pocket. You will, of course, not get the total amount that the outstanding balances were worth.
Offer discounts for any customers that offered to pay the full amount that is owed.
Sell All Assets
When companies go out of business it is often the case they have excess inventory now is the time to set it up at some prices this can provide you with some of the cash necessary to pay the debt. If you are trading at a deep loss and need help you may need to speak to a liquidators.
You might consider selling your remaining inventory online via Amazon craigslist eBay or give things away on Freecycle.
File Articles of Dissolution
Once you have a better look at your finances, you should file the articles of dissolution. You will need to submit articles for every state in which you are registered to conduct business. The actual paperwork to vary from state to state and country to country, but it tends to be pretty straightforward. There are occasions where you can send an e-file or a hardcopy.
There are likely going to be other business accounts that you want to shut down. If you have licenses, permits, your business name, memberships to governing bodies and professional bodies, as well as any credit lines leftover should all now be canceled.
Make sure that you are done collecting all of your payments and have made payments on whatever you need to before you close the final credit lines and bank accounts. This will also apply for rent or utilities, you do not want to close them too soon because it will leave you in a bit of a pickle for the last few days or weeks of trading. This is less likely to happen if your strategy is well thought out before you take action.
Final Payroll Forms and Taxes
Once employees have been paid for the last time, you will need to file the correct federal and state employment forms, and make sure the business tax is done according to the regular schedule.
Distribute Money and Assets
Once you have taken the following steps, you can be sure that you have close your business in the most proper way. This will stop you from having debt issues or tax issues later down the line. It is tempting when things are overwhelming to go off the grid and hide from the responsibilities; however, ignoring business-related matters never ends well. So plan your strategy say goodbye to your employees, and feel good about closing the door one last time.