If you are considering closing your business, you will need to take the necessary steps to do so, rather than just locking the doors. It takes time to close a business, and it often involves a more intensive process than when you open your doors for the first time.
Consulting a business attorney before you start the process of closing down is a good idea. Your lawyer will be able to assist you in preparing all of the necessary paperwork, and help you check off the steps as you go. Below are several steps you should take to make sure you are covering your bases.
If it is just you and you are operating as a sole practitioner, you can close down if you so choose. However, if your business is a LLC, corporation, or partnership, you will need to review the procedure for dissolution that was agreed upon when you formed the business.
The operating agreement should list the steps and what needs to occur in the event of a dissolution. There may be a possibility, if you have several other partners, that you can sell your share instead of closing the business entirely. You will also want to follow state law, so check the rules on dissolution within your jurisdiction.
Even if you dissolve your business with your partners, you will want to make sure that you file the correct government forms with your state. This will eliminate your liability for business taxes as well as other filings, and it will also inform creditors that your business is no longer acquiring debt.
It’s an important step, and forgetting to do that can put you on the hook for the business’s debts.
Be sure to cancel all permits, licenses, and anything else that you used fictitious business names. If there is no record of cancelation, you could remain on the hook for taxes and penalties associated with your business, long after it has been dissolved.
You must contact the agencies which issued the permit, license, or right to business name. This can vary from state to state, potentially even from business to business. Many agencies will offer an “abandonment form” or request a letter which will state the date of effect. This is for their records and they can officially note that your permit, license, and/or fictitious business name is cancelled.
In addition to notifying the government that you are closing up shop, you should also notify the following people and businesses:
- Service Providers: Insurance provider, utilities, accountants, and any other business that provides a service to your business.
- Suppliers: Any business that provides you with product or other goods should be notified as to when the last delivery should be made.
- Lenders: If you owe any lenders, be sure to let them know of the dissolution of your business.
- Employees: Give your employees ample notice so as not to leave them in a bind.
- Customers: Be sure to tell your customers, and fulfill any contractual obligations.
- Credit Cards and Banking Accounts: Pay off your credit lines and close remaining accounts.
- Landlord: Give your landlord at least 30 days notice before you vacate the property.
If you fail to notify any of the above, you can be on the hook for any bills or penalties for failing to let them know. For example, if you don’t tell your landlord, then they have every right to assume that you are still leasing and using the commercial property. Not paying the rent for your commercial lease is not the same as giving notice, and the landlord will have the right to demand full payment of the owed rent.
If you are ready to sell or close your business, you should first contact a business attorney near you. An experienced lawyer will assist you in the preparation of all necessary paperwork, and will help to ensure nothing is left unfinished. Your lawyer will also be a good resource for the real estate sales process if you are planning on selling any business property.