- A checklist for small businesses looking to close up shop
- Make sure you notify your employees, lenders, and other relevant parties
- Wrapping up your taxes and contracts with clients
It’s never easy for a small business owner to decide to close the company they worked so hard to build. Whether the business has become unsustainable or you’re looking to exit and haven’t been able to find a buyer, there are several steps you need to take when shutting down.
This checklist offers some guidance on how you can close a business without running into any pitfalls. However, you should also consult with your lawyer and any other relevant business professionals to help you prepare your strategy.
Inform any other owners
If you’re a sole proprietor, the decision to close your business is yours alone. Otherwise you’ll need to consult with any partners or with your board of directors. Consult your articles of organization to help you determine how the closing process will proceed, and have all owners sign a written agreement consenting to the decision.
Break the news to your employees
Let any employees know as soon as possible that you’ve decided to close the business. This will give them time to prepare for unemployment assistance or seek other opportunities. You’ll also need to collect any company-issued property and make sure you’re compliant with any federal or state labor laws, such as compensating workers for any unused vacation time.
Conclude matters with your customers
Notify your customers and review your accounts to see which matters you’ll be able to see through to completion. Return any deposits for any projects you need to cancel. Collect all outstanding accounts receivable or sell them to a factoring agency.
Cancel anything you no longer need
When you set up a business, you’ll need to make sure you have any necessary licenses, certifications, and other requirements; when you close one, you should undo all of these steps. Cancel anything you won’t need anymore, including commercial leases, business subscriptions, company credit cards, and your Employer Identification Number. Notify your suppliers, service providers, utilities, and other companies with whom you do business.
Sell off assets
Liquidate any remaining inventory, equipment, or other assets. You also have the option of donating these items to get a deduction on your taxes.
Settle your finances and taxes
Notify state and federal tax agencies that your business will be closing. With the exception of sole proprietorships, you’ll need to indicate that the documentation you’re filing is the final return for your business. Pay off any outstanding debts, and distribute any remaining funds among the owners.
Keep your records
Even after you shut down, legal issues or other matters related to your business could come up. You may also be required to maintain certain records, such as tax or employment information. Keep them on file for three to seven years to ensure that you can access this information if necessary.