Learn How To End Your Business The Right Way
Businesses close for a number of reasons. Sometimes, they close because the founder has suddenly become ill or has passed away, or perhaps because of bad economic times, increased competition or poor management. No matter why, all business owners must undertake a number of steps before closing their doors.
First, if your business is incorporated, you must vote to close the business as set out in your corporate documents or your particular state’s statutes. This assures that you dissolve your business officially, and begins the process of dissolution of the corporation and disposal of its assets.
Next, you must notify your employees and assure payment to them of any wages they are due – up to the closing of the business – within the period of time required by state law. You may also be required to pay any benefits accrued, as well as unused vacation time. Make any final withheld tax deposits on employee wages.
You must also notify your landlord, if applicable, giving the proper notice as stated in your lease – usually at least 30 days before you intend to vacate the property. You should also cancel your insurance policies, providing your insurers with the final date of doing business. You may also be required to give advanced notification of cancellation to vendors with which you have contracts.
Vendors for the business should be notified of the closing, and all outstanding bills paid, or a schedule of payment set up for any remaining balances. If they agree to a return of merchandise, make sure you have paperwork that indicates that no further payment is due. If there is saleable inventory, consider initiating a going out of business’ sale.
Any taxes due must be paid. These include withheld payroll taxes up to the final payroll, unemployment taxes (federal and state), sales tax due up to the closing date, and any other local taxes that might apply.
Fulfill any contractual obligation with your customers. Return any deposits or pre-payments for goods not yet delivered or for services not rendered. Collect outstanding accounts receivable as expeditiously as possible, preferably before notifying customers you are closing your doors. Troublesome accounts should be turned over to collections, or preparations made to report them as losses.
Notify creditors and service providers of the closing, and arrange with utilities to send final billings. Cancel state or county permits and licenses, including fictitious or assumed business name documents.
Consult with your accountant about any final tax papers that may be required, including annual returns for the business, which contain boxes to check that indicate it is a final return. He or she will advise you on filing other forms for final disposition of business property, such as like-kind property exchanges, final employee pension or benefit plan distributions, and business asset sales. You must report your corporation dissolution or liquidation, and the canceling of your employee identification number.
There may be other state and local agencies that must be contacted regarding the closing of your business. You may wish to consult with an attorney about further requirements for closing a business in your state and local community.
ABOUT THE AUTHOR: The Law Offices of H. Michael Soroy
At the Law Offices of H. Michael Soroy, our lawyers represent businesspeople involved in the breakup or closing of a business. We work diligently to obtain an orderly resolution to all business concerns, while also ensuring our clients’ interests are protected throughout the dissolution process.
As a firm, we have extensive experience handling the full spectrum of business and commercial law matters. Drawing on these experiences, we are able to effectively guide clients through business closings. Whether we are resolving disputes through negotiated settlement, or are forced into court to request dissolution, we are able to effectively protect our clients’ rights and interests.
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While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.