Steps for Closing a Business

In a business, many unexpected or unforeseen events can happen due to the involved dynamics. One possibility is that you may have to discontinue it for certain reasons like not getting enough time, lack of support from the family, financial and management problems, or planning for a larger business. In such a situation, you can either opt to sell it, pass it on to a business partner or a relative, or close it down completely. If you really decide to choose the latter, then it is always better to follow a certain plan to close it safely and legally.

Voting for Dissolution

If you are a sole proprietor, then you may not face much of a problem; however, if you are operating in a partnership or a corporation, then you and your associates should equally agree to the decision. You can follow your own organizational regulations or the rules of your state’s business statutes. As per the rules, there should be a maximum vote of the stakeholders 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 framed for the said process.

Follow Regulations

The second step is dissolving the business entity officially. This is applicable for a corporation or a limited liability company (LLC). Here, you are required to fill certain official documents. However, it has to be noted that each state has different rules. If you dissolve your business with a government office (state or local), you will not be required to bear the liabilities of taxes and/or filings. This also helps in informing the creditors that your entity is no longer liable to incur debts.

Terminate Rights

The third step is to cancel permits, licenses, and the business name, so that no other company can use your rights or trademarks. If you don’t do this at the time of closing, there are chances that some other company may use them and incur penalties 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 have a proof to avoid any unwanted issues.

Payoff Outstanding Dues

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

Following these legal formalities will protect your credit, as well as your reputation as a businessman. In some instances, selling a business is a better option; however, make sure that you research more information about the price and potential buyers. Be patient and don’t make haste, otherwise you will regret, if you get a better deal later on. In case of any difficulties, you can always hire and/or seek advice from a professional like a lawyer, financial advisor, or an accountant.

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