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What Are Some Reasons Why Companies Go out of Business?

Going out of business can be a difficult situation to approach. Understanding why businesses end can sometimes help prevent the situation from arising. In many cases a business might end simply because it has no longer become profitable. However, a company can go out of business due to other problems such as:

  • Lack of a proper business plan
  • Failing to oversee employees correctly
  • Violations of federal, state, or local business laws
  • Legal issues such as discrimination or harassment
  • Being hit by a lawsuit
  • Failed business projects (i.e., failed mergers or failed acquisitions)

Legal Issues to Consider When Going out of Business

When a company goes out of business, it’s not always a simple process. There may be many legal issues that need to be handled before the case can be closed. Some of these include:

  • Settling debts
  • Business succession (i.e., transferring the business to another owner)
  • Tax issues
  • Distribution of business property
  • Maintenance of business records, especially confidential information

Failure to properly close a business can result in legal violations. For instance, leaving tax issues unattended can create liability for the owner and/or employees involved.

When selling or closing a business, it may be necessary to work with professionals, such as accountants and/or lawyers. This will help to ensure that you’re following the proper procedures.

Do I Need a Lawyer for Help with Business Issues?

Going out of business can sometimes be a complex challenge. However, they may be ways to minimize losses and shift some of the impact through careful review and planning. You may wish to hire a lawyer if you need help with the process. Your attorney can ensure that no loose ends are left undone, and can provide you with advice on how to proceed.

Photo of page author Jose Rivera

, LegalMatch Legal Writer

Last Modified: 04-03-2014 03:48 PM PDT

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