Checklist for Going Out of Business: Closing a Company

What you’ll discover:

How can I close my company?
After ending a company, what should I do with the assets?
How do I inform my employees that I am shutting the company?
How do I report the closure of a business?
What else should I do while ending a business?
Get legal counsel as required to ensure a smooth breakup.

Entrepreneurs may decide to shut, sell, or transfer their company years in advance, giving them enough time to arrange their exit options. Regrettably for many other company owners, situations beyond their control may force them to permanently discontinue operations. Despite the cause for your company’s closure, you’ll probably have some questions about how to continue.

In this post, we’ve assembled numerous typical questions company owners may have regarding shutting a firm, with answers meant to make your transition as painless as possible.

How can I close my company?

Following the proper measures to dissolve your firm is critical since it may restrict your ongoing obligation. Dissolution entails officially informing the following parties (where applicable):

Office of the Secretary of State (in each state in which you do business)
The Internal Revenue Service (IRS) and state tax agencies
Licensing authorities

You must submit official Articles of Dissolution with the state business authorities and pay the relevant fees. If your company has more than one owner, a formal resolution of the members, shareholders, or partners should be created. This document formalizes the decision to dissolve the business and empowers the corporate officers to take any necessary steps to terminate the company’s activities and state registration.

Don’t forget to terminate any business licenses, permits, or assumed business names.

After ending a company, what should I do with the assets?

Sadly, when it comes time to terminate a firm, there are often more debts than assets. List your commercial debtors, including:

Banks, landlords, utility companies, suppliers, and third-party service providers are all examples of third-party service providers.

If your company has enough assets to cover all of its responsibilities, pay your outstanding invoices and request ‘paid in full’ letters from creditors to prove that you have satisfied your accounts. Don’t forget to add any unpaid company taxes. Consider paying workers in full on their final day of working for you (this may be obligatory in certain jurisdictions) (this may be mandatory in some states). Following paying for expenses related with dissolution and any obligations, leftover assets should be distributed among the business shareholders or members as stated in the shareholder or member agreement.

If your firm does not have adequate assets to pay all of its commitments, seek out to creditors about settling your bills with them. Realize that if you are unable to pay your creditors in full, they may bring payment claims against you. Each state’s laws establish the time frame for submitting claims and the conditions surrounding such claims. In certain circumstances, filing for company bankruptcy may make sense.

How do I inform my employees that I am shutting the company?

There is never an easy way to notify workers that you have taken the terrible choice to stop your firm. Give your staff as much notice as possible. It is also critical to understand and follow all relevant local, state, and federal labor and employment regulations.

Business advisors advise being as honest and open with employees as possible when explaining why the firm must be closed. Prepare your message as well as possible, and anticipate employee inquiries about what the decision implies for them. Workers will most certainly want instructions on what to tell clients, when and how they will be paid, and if you will be able to help them find other jobs.

How do I report the closure of a business?

Record your business closure to your state’s Secretary of State or another business body, as mentioned in further detail above. This step must be completed in each state where your firm is registered to do business. The good news is that dissolution paperwork may be submitted online in the majority of states.

The IRS website provides information for small company owners who are permanently shutting their doors, including forms for reporting asset sales and transfers. If your company was required to submit separate tax returns, you must file a final return by April 15 of the year following the year in which you terminated operations.

What else should I do while ending a business?

If you have clients who have not yet paid for products or services, make every effort to collect on their accounts before closing your firm and distributing its residual assets. Some company owners believe that phoning consumers rather than sending letters is a better way to collect on outstanding debts. In certain circumstances, offering a discount for paying promptly makes sense. Attempt to collect on debts before informing consumers that your company is shutting, since this will boost your chances of collecting.

You must also terminate your company’s web presence, which includes:

Websites
Profiles and accounts on social media
Services for business referrals
Listings in search engines

Using a methodical approach to eliminating pages and listings from each site or service provider will guarantee that you catch all of them.

Get legal counsel as required to ensure a smooth breakup.

Stopping your company is never pleasant, but doing it on purpose might help you avoid legal exposure in the future. As you can see from the above discussion, there are several factors to consider when dissolving a firm. Consulting an attorney and a tax specialist will assist ensure you have done all necessary steps to protect yourself against potential claims, allowing you to begin the next chapter of your career with confidence and peace of mind. If you have any issues regarding shutting your company due to COVID-19, you may get free legal counsel and important paperwork from the Coronavirus Law Center.