A variety of circumstances may lead you to decide to shut down your business. Perhaps you are facing financial hardship, wish to retire, or simply no longer desire to continue the enterprise. No matter what your reason for closing, a number of steps need to be taken before you shut your doors for good. Assuming this is done without filing a Petition for Relief under the Bankruptcy Code or making an Assignment for the Benefit of Creditors, the steps below provide some suggestions for owners closing a business.
- Make the decision: Of course if you are a sole proprietor this simply means making up your own mind. Otherwise, however, the decision must be made in accordance with the applicable provision in your shareholders', operating or partnership agreement.
- Consult with experts: Closing a business can be a complex process. It is often beneficial to seek advice from a business attorney, accountants, business valuation experts and other professionals.
- Take inventory: It is wise to make a list of all your business assets and an estimate of what they are worth. You may also want to consider getting a business valuation. Both of these steps will help you complete your final tax return.
- Address pending issues: Consider when you want to announce the business closure to employees and customers or clients. Plan for how you will make final payments on equipment and leases, and when employees will receive their final paychecks. Inform and make arrangements with insurance companies, utilities and applicable vendors. Depending upon whether or not the company has outstanding debt to lenders and/or trade creditors, you may need to consult a bankruptcy attorney (even if a bankruptcy case is not ultimately necessary).
- Address tax obligations: Speak with an accountant or an attorney who has relevant experience closing businesses.
- Close accounts: Close any business bank accounts and cancel business credit cards.
- Keep necessary records: The law requires you to maintain certain records, like employment and tax records, even after the closure of a business. Generally it is wise to keep records for six years.
An experienced attorney can guide you through the business closure process and advise you of other steps you should take as a business owner.
