Going Out of Business Sales

Going out of business sales can present an opportunity for consumers to buy goods at rock-bottom prices. For the business owner, it is an opportunity to dispose of inventory when they have made the difficult decision to discontinue their business efforts. The sale must be conducted according to certain guidelines to be legal.

Shutting Down a Business

A going out of business sale is conducted to liquidate inventory held by the business. The understanding from the point of view of the consumer is that once the stock has been sold, that the business will no longer be operating at the location where the sale is being held.

Different Names for the Sale

When going out of business a sale may be referred to in different ways. Other terms used to describe them include the following:

• Distress Sale
• Fire Sale
• Forced to Vacate Sale
• Liquidation Sale
• Lost Our Lease Sale
• Moving to a New Location Sale
• Selling Out Sale
• Under New Ownership Sale

Registration Required for Sale

The procedure for registering going out of business sales will vary from state to state. To find out more, check with the Attorney General's office or the state Department of Consumer Protection to find out what is involved.

Examples of Procedures for Going Out of Business Sales

Here are some examples of how these kinds of sales are dealt with in different states:

• Alabama

Alabama business owners who want to hold a going out of business sale must post a bond of $2,500.00 or five percent of the wholesale value of the inventory to be offered for sale, whichever is greater. The business owner must also surrender his or her business license at the time the bond is posted, and the license is considered null and void as of that point.

• Colorado

In Colorado, going out of business sales are not regulated by the state. At the local level, a business owner may need to get a license to hold one. In Denver, a business owner must get a license before the sale can proceed. The license is good for 60 days (not including Sundays or holidays). The license may be extended for a further 30 days, if need be. An application fee of $150 and a license fee of $100 must be paid (June 2009). The license form is available for download on the Denver Government web site.

• Connecticut

In Connecticut, a business or business owner who wants to hold a sale must obtain a license from the Department of Consumer Protection. If the business has enlisted the help of a promoter, then the promoter must also be licensed. As of June 2009, the cost to get a Closing Out Sale license is $100.00.

Connecticut also requires that the business owner pay a special deposit equal to one percent of the wholesale cost of the business' inventory. The deposit is refundable. The Department of Consumer Protection also requires the business owner to file a list of all inventory that will be included in the sale. The license is valid for up to 90 days.

• Michigan

In Michigan, the state doesn't require a business to obtain a license to conduct a going out of business sale. Individual municipalities may require a business owner to get a license before holding the sale. For more information, contact your local town or city hall.

For More Information

As you can see, proper procedures for holding these types of sales vary greatly. To get more information about conducting sales when going out of business, contact your local municipality to find out which regulations apply to you.

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