Steps for Closing a Business

After starting a business, many unexpected things can happen. One possibility is that you may have to discontinue the business for certain reasons like not getting enough time, a neutral approach of the family towards business, financial and management problems, or planning for a corporate business. In such a situation, you can opt for selling the business, pass on to the business partner or relatives, and/or closing the business. If you really decide to close your business, then it is always better to follow certain plans to close it safely and legally. Here is some information about the steps to be taken while closing a business.

Steps for Closing a Business

If you are a sole proprietor, then you may not face any problems while deciding when to close your business. However, if you are operating in the partnership or incorporation, then you and your business associates should equally agree to the decision of closing the business. Regarding dissolving of the business entity, you can follow your own organizational regulations or the rules of your state’s business statutes. As per the rules, there should be maximum vote of the business owners supporting the dissolution. Ensure that the owners sign in a consent form regarding the decision. While conducting the process of voting, you can follow the guidelines for a correct procedure.

The second step for closing a business is dissolving the business entity officially. This step is applicable for a corporation business or a limited liability company (LLC). For processing this step, you are required to fill certain official forms. However, it is to be noted that each state has different rules for dissolving the business. If you dissolve your small business with government offices (state and local), you will be deprived from the liabilities of business taxes and/or filings. This also helps in noticing the creditors that your entity is no longer liable to incur debts.

The third step is to cancel permits, license and business names, so that no other company can use your business rights. If you don’t deregister your business name and/or license at the time of closing, there are chances that some other company use them and incur penalties and taxes in the future. For cancellation of a seller’s permit or license, you can invalidate them by contacting the issuing agency. It is always advisable to publish in a local newspaper about the abandonment of your business name. This way, you can have a proof against any unwanted issues after closing the business.

While closing your business, make sure to pay the taxes, debts (e.g. business loans) and the employees paychecks. You may be required to fill certain forms about income tax payment and returns (if any). You can notify your creditors about your decision and clear or settle any business debts.

Following these legal tasks will protect your credit, as well as your reputation as a businessman. In some instances, selling a business is a better option, rather than closing it. While selling, research more information about the price and potential buyers. Be patient and don’t make a haste in selling the business, otherwise you will regret, if you get a better deal later on. In case, you find it difficult to handle closing or selling of your business, you can always hire and/or seek advice from a professional like a solicitor, financial advisor or an accountant.

Tags: Business, Closing, Steps