If you are wondering about the steps involved in how to close your business, this article will give you information about the steps involved in doing so.
Deciding to Close Your Business
For an entrepreneur who has invested countless hours as well as financial resources in trying to build a business, making the decision to cease operations is not an easy one to make. There are a number of reasons why a business is closing, however, and not all of them mean that the venture is no longer profitable.
Reasons Why a Business May Close
Here are some reasons why someone may be wondering about how to close your business:
- Takeover by another person or a company
A business may also need to be closed following the death of the owner if his or her beneficiaries are not interested in keeping it going.
How to Close Your Business: Steps Involved
Here are steps you may need to follow if you want to shut the doors to a business permanently:
- Consult with an attorney.
Closing down a business involves a number of steps and you want to make sure you have filed all of the necessary paperwork on time.
- Tell employees and suppliers that the business will be closing.
This step will give your suppliers time to prepare final invoices. Your employees likely will have questions about any severance pay they are entitled to and their benefit plan. They will also want to start looking for another job.
- Inform the landlord of the plan for closing.
If you are renting office space or a building for commercial purposes, the landlord must be notified of the plan to shut the business down. Plan to do this at least 30 days before you close the doors.
- Make sure all outstanding orders are fulfilled before the date of closing.
You need to ensure that all of your obligations to your customers have been fulfilled before the business is shut down.
- Make a list of all the assets belonging to the business.
You will need to decide if any of the equipment and other items owned by the business will be sold to pay for the company's debts. Inventory may also be used for this purpose.
- Make arrangements to pay off the business debts.
Contact all of your business creditors and arrange to pay off any debts owning. This part of the process must be completed before the business shuts down.
- Complete the final tax return for the business.
State and federal income tax returns for the company must be filed for the final year the business was operating. Any amount owing must be paid before the business is shut down.
- Contact the Office of the Secretary of State to get termination forms.
To formally shut down a business, you will need to fill out forms provided by the Office of the Secretary of State. Once the forms have been submitted, it will take a few days for them to be processed.
- Cancel any commercial insurance policies.
Contact your insurance agent or the company directly to inform them that you are shutting down the business and when you would like the business insurance coverage terminated.
- Close any bank accounts the business has been using.
Once the company is no longer operational, the business bank accounts can be closed. Contact the financial institution to make the arrangements.
- Cancel the business name and any trademarks it was using.
If the business is being bought by another person or company, you may want to transfer the name to them. Otherwise, they need to be canceled.
- Prepare W-2 forms for any employees and make sure withholding tax is paid on their behalf.
Before the business has been shut down, you will need to ensure that Social Security, income tax and any other withholdings have been paid to the government.
There are many steps involved when you are thinking about how to close your business. To make sure that you look after everything you need to do to shut it down properly, get professional help.