Is it time for you to get out of business? Here, you have a number of options to include: selling your business, liquidating your assets, transferring ownership or even filing for bankruptcy. Instead of looking at each option, we will take a look at getting out of business by simply shutting it down.
If you are the sole owner of a company, you can shut down your business as you see fit. However, if you are in business with others through a partnership or a corporation, you will need the consent of the other business owners to shut down.
For businesses that are not a sole proprietorship, the articles of incorporation outlines how to dissolve your business. Follow those instructions and bring in an attorney to provide a written agreement.
Bring in the Experts
The smaller or less complex your business, the easier it is for you to shut it down. However, most businesses have extensive records and there may be certain liabilities that must be addressed before you can shut it down.
Discuss with your attorney your plans as well as with your accountant. You need to ensure that your business follows an outline to unwind its affairs. Usually, a business cannot be shut down over night unless you are insolvent. Even so, there are obligations that must be addressed.
Contact Your State
Your business is registered with your state and your state’s department of corporations or equivalent agency must be notified that you are getting out. Here, your state will have certain procedures that must be carefully followed before your business is considered closed.
Your state may require you to fill out dissolution papers. Your attorney can help you with that. Even if formal papers are not required, some type of notification to creditors and other vested parties, such as suppliers, may be warranted.
Cancel Your Legal Documents
Businesses typically have licenses, registrations and permits related to their enterprise. You will need to notify each entity that you are planning to shut down as per their methods of notification.
If you are doing business under a trade name, then you can cancel that name with your state. Ensure that your annual report is up to date and your fees paid.
You can go out of business, but you may still have a tax liability. Your accountant will guide you here. You will file your final federal and state tax returns, and you may needy to pay state sales tax before you shut down.
Notify the IRS that you are closing down too. Typically, this involves closing down your Employer Identification Number or EIN account. You should keep in mind that once you return your EIN, you will not be able to use it again. Ask the IRS to supply you with a checklist for the appropriate tax actions you must take as you close down.
Shutting down your business does not absolve you of your financial obligations. Creditors must be notified of your decision. If you have outstanding receivables, attempt to collect what is owed.
If you cannot pay your debts, you can seek business bankruptcy. A business attorney can help you with those steps. You should also notify your insurers that you’re going out of business too.
Keep your business records following dissolution. Most records should be kept for at least seven years; your accountant can provide a breakdown of what to keep and for how long.
Although simply shutting down a business may be a sensible approach, you should know that your business may be of value to another company or to an individual. That interested party may want to secure your customer lists, purchase equipment or assume your business name. Talk with a business broker to find out if there is a way to make money from your business closure.
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