How to Close Your Business

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 What Is Business Law?

Business law or commercial law is an umbrella term for the body of laws governing entities and commercial transactions. An example of this would be how if you wanted to start a shipping company, business law would dictate:

  • How to organize and register your company;
  • How to pay your employees; and
  • How to legally ship your merchandise to customers overseas.

Business law applies to many different aspects of a business. Additionally, business laws will vary based on the type of business and its structure, as well as by jurisdiction. An example of this would be how a private business would be governed differently than a public business, or how corporations and general partnerships are governed differently.

Some specific examples of business law include:

  • The Sherman Antitrust Act of 1890: Antitrust law regulates the organization and conduct of businesses, in order to ensure fair competition and protect consumers from oppressive business practices. The Sherman Act prevents monopolies, and restricts business activities that affect interstate commerce;
  • The Lanham Act: Also known as the Trademark Act of 1946, this is a federal law that regulates trademarks, service marks, and unfair competition. To expand on the earlier example, if you created a trademark for your shipping company, you could register your unique trademark in order to receive certain legal protections under this Act;
  • The Securities Act of 1933: This Act requires that businesses provide its investors with specific financial information prior to investing in the company;
  • The Federal Tax Code: The Federal Tax Code covers everything from how to tax your employees, to how to file federal income taxes for your business; and
  • The Fair Labor Standards Act (“FLSA”): The FLSA governs employee wages and overtime pay, and applies to the majority of both public and private businesses. As such, if your shipping company has nonexempt employees, you must pay them at least the federal minimum wage, and one-and-one-half times their normal rate of pay for overtime under this Act.

Because different types of business structures are governed differently, one of the first decisions that a business owner must make when forming their company is to choose a structure when registering their business. This will help ensure they adhere to the correct and relevant laws when operating, selling, and closing their business. The way in which a business is formed will dictate things such as:

  • The amount of funds that they can receive from investors;
  • How many people can sit on its board;
  • Who will be held responsible for liabilities and/or debts that are incurred by the business; and
  • How the business will be taxed.

How Do I Legally Close My Business?

If you are considering closing your business, there are some specific and necessary steps you will need to take before doing so; you cannot simply lock the doors and declare your business as closed. Because of this, you may want to consult with a business attorney before you begin the closing process.

Your lawyer can assist you in preparing and filing all of the necessary paperwork. The following sections are a general summation of the steps you will likely need to take to legally close your business.

Do I Need To Vote To Close My Business?

If you are operating as a sole practitioner, you can close your business whenever you so choose. However, if your business is a LLC, corporation, or partnership, you should review the procedure for dissolution that was agreed upon when the business was formed.

Business dissolution is the formal closure of a business with the state in which the business is registered. Some examples of the ways in which you might prepare for a business dissolution include:

  • Notifying the Internal Revenue Service (“IRS”), as well as all other appropriate state and local tax agencies;
  • Canceling all business licenses;
  • Notifying all creditors, insurers, lenders, vendors, service providers, and suppliers;
  • Notifying your landlord, if you are leasing or renting your company’s physical location;
  • Collecting any debts that are owed to your business; and
  • Selling company assets, such as furniture, equipment, and property.

If a business operates as a corporation, LLC, or partnership, all business associates must be in agreement regarding dissolution. This will most likely be governed by either organizational documents, or state business statutes.

The decision to dissolve the business should be recorded in the meeting minutes, or through a written consent form. If you have several other business partners, you may be able to sell your share of the business, as opposed to closing the business entirely.

How Do I Dissolve My Business With The Government?

Once your business has been dissolved with your partners, if applicable, you should ensure that you file the correct government forms with your state. Doing so will eliminate your liability for business taxes, as well as other filings.

Additionally, it will inform creditors that your business is no longer acquiring debt. This is an important step, and forgetting to take this step can put you on the hook for the business’s debts.

How Do I Cancel Permits, Licenses, and Fictitious Business Names?

The next step would be to cancel all permits, licenses, and anything else that required you to use fictitious business names. This is especially important because if there is no record of cancellation, you could remain liable for taxes and penalties associated with your business long after it has been dissolved.

You must individually contact the agencies that issued the permit, license, or right to business name. This can vary from state to state, and even from business to business. Many agencies offer an “abandonment form” for you to fill out, or they will request a letter which will state the date of effect. This is for their records, and they will officially note that your permit, license, and/or fictitious business name is canceled.

Who Else Should I Notify When I Close My Business?

Once you have notified the government that you are closing your business, you should notify the following parties:

  • Service Providers: This could include your insurance provider, utilities, accountants, and any other business that provides a service to your business;
  • Suppliers: This will likely include any business that provides you with product or other goods. They should be notified regarding when the last delivery should be made;
  • Lenders: If you owe any lenders, you will need to inform them of the dissolution of your business;
  • Employees: You will need to give your employees ample notice so that they can seek other employment as soon as possible. The more notice you give your employees, the less you will be disrupting their work life;
  • Customers: You will need to tell your customers when your last day of business will be, and fulfill any contractual obligations;
  • Credit Cards and Banking Accounts: You will need to pay off your credit lines and close remaining accounts; and
  • Landlord: As previously mentioned, you will need to notify your landlord of your intent to vacate if you do not own your business’ premises. Provide your landlord with at least 30 days notice before vacating the property.

Should you fail to notify any of the above, you could be liable for any bills or penalties. An example of this would be how if you did not inform your landlord, they have the right to assume that you are still leasing and using the commercial property. Because not paying the rent for your commercial lease is not the same as giving notice, your landlord will have the right to demand full payment of the owed rent.

Do I Need An Attorney To Close My Business?

If you wish to close your business, you should consult with an experienced and local business lawyer. An attorney can help you completely close your business in accordance with the business laws of your state. An experienced and local business attorney can ensure that you take all necessary steps to reduce violations or liability, and will also be able to represent you in court, as needed.

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