Closing a business is often more complicated than simply shutting up your shop and not going back. It actually requires you to go through a detailed process of many steps. You have multiple legal obligations and you need to ensure you take care of any remaining staff.
So how do you say goodbye to a business successfully? Let’s take a look.
1. Tell All Your Stakeholders
The first step for closing any business is to tell all your stakeholders when you will close. People you need to inform include your staff, customers, and any other business owners. You’ll also need to tell vendors and partners about your plans so they can arrange to cease trading with you.
Set out a timeline for closure. Highlight key dates in the calendar, including when you’ll stop operating and liquidate any remaining assets.
2. Perform Legal Dissolution Preparations
Next, you’ll want to perform various legal dissolutions preparations. You’ll want to discuss the process of canceling an EIN with a professional who understands what to do. Accountants can help you wrap up your business as an entity and file your final accounts.
3. Inventory And Assets
After that, you’ll need to consider your remaining inventory and assets: things your business owns but no longer needs. Most owners do a full stock, building, and equipment check to see what they still have on their books. Administrators then move to liquidate anything that remains, distributing proceeds to creditors first, then the business’s owners and shareholders. The exact form this takes depends on your company’s financial situation.
4. Employee Transition
Telling employees about the closure of your business is often the most challenging part of the process because it is the most human. In many cases, emotions can run high, especially if the business closure comes as a shock.
The trick here is to provide warnings as long in advance as possible. Clearly, you can’t provide years or notice, but a couple of months provides people with opportunities to find new work elsewhere.
When notifying employees, provide them with resources telling them about their entitlements and any benefits they will receive. Also, consider providing them with shares of the business, particularly if they have been there for a long time.
5. Contractual Obligations
After that, you’ll want to consider any remaining contractual obligations. Who do you still need to serve and what promises have you made to the people working for you?
Take a look at your current leases and agreements and explore the termination clauses. Many will allow you to exit agreements early if your business is ceasing operations permanently.
6. Government Filings
Next, file the relevant paperwork with government officials to let them know you won’t be trading anymore. This part of the process is among the most important because it means you will no longer appear on government books. The IRS will not come looking for your firm, asking why you haven’t submitted accounts or paid taxes for the particular financial year.
7. Documents And Records
While doing this, you should also ensure you retain all critical documents and records relating to your business. Many regions have mandates requiring you to keep records going back several years, even after you close your business. You can file these away somewhere safe, upload them to the cloud, or pass responsibility over to a third-party company if that’s easier.
You should also check you have disposed of any sensitive information that could compromise stakeholders before shutting down. Get rid of any personal records or details the law does not require you to keep.
8. Tell Professional Networks
If you are a part of any professional networks, tell them about your decision to shutter your business and close up shop for good. Make sure you tell industry groups and relevant organizations. Let them know about your business closure and why you won’t be coming back. Providing them with this information will help them update their records and ensure they don’t continue to send you invitations, research, and referrals.
If you have a majority share in the business, you can unilaterally decide to close it. However, it is customary to tell other shareholders, partners, and owners about what you are doing. It also provides them with an opportunity to buy the company from you and continue operating, if that’s what they want to do.
This method is often the best because it provides you with cash but eliminates the need to observe any of the other parts of the process outlined in this blog.