10 Steps to Close Your Business as Smoothly as Possible
Putting your whole self into a dream, and turning that dream into a business, is no small thing. Neither is saying goodbye. But a savvy businesswoman knows when it's time to move on, for either professional or personal reasons. So while saying goodbye can be hard, it just might be the right thing to do for who you are now, and where you want to be tomorrow.
How to close your business in 10 steps
You could argue that the hardest part about closing a business is actually deciding to, and the rest is just details. But, oh, those details! Once you've decided to close the door, here's what you need to do to make it official.
1. Making the call.
If you're the only owner of the business, this is pretty easy, from a strictly legal standpoint. If you have a partnership or anyone else involved in running the business, you need to have everyone agree (in writing) on closing the business. The best business plans actually include the endgame from the start, so that everyone involved understands the process you'll go through when dissolving the partnership and closing down.
2. Find a good lawyer, and an accountant.
If you don't already have each of these, find ones that specialize in, or at least have experience with, closing or selling businesses. There's going to be a lot of paperwork and unexpected details for you to handle. Having people with experience on your side is going to make the whole thing that much easier. If you already have these folks in your contacts, once you decide to close, they should be among the first people you call.
3. Dissolve the company.
Filing this paperwork officially tells the government that your business will no longer be a taxable entity. Not doing this could leave you open to still being taxed, or other legal issues. Keep in mind, cancelling your business name doesn't automatically happen here. That would fall in with permits and licenses, below.
4. Close permits and licenses.
This includes everything from standard permits, such as county zoning codes, to industry-specific licenses. Hopefully you've already done yourself a solid by keeping every such item you've received together and close at hand. If you haven't, and you've been in business for a decade (or a couple), this could become quite a chore.
5. Settle your debts.
You can begin to sell off unnecessary inventory in order to do this, or come to an agreement with everyone you owe money to, that you'll include them in the final profits. If you're selling the business, this could mean a guaranteed amount or percentage of the final sale price, but you can make the same arrangement per the sale of inventory as well.
6. Sell equipment and other assets.
Have everything you don't want to keep assessed to know its proper value. If you're selling your business, you'll have to do this anyway. But even if you're closing outright, knowing what your inventory is worth before trying to sell it helps you get the best deal possible. You want to make sure you have enough money to pay off your debts, and share out among any partners.
7. Give proper notice to employees.
Under certain circumstances, you are legally obligated to give fair warning to employees before you close up shop. This is usually for companies with more than one hundred employees. Even if you're a small business, though, remember that you're not the only person who has invested themselves in your business. Saying goodbye will be hard for the people who work for you too. Fair warning gives them a chance to have some proper closure with a place they love. And, obviously, to find more work.
8. Give your customers some warning too.
If you're a supplier, it's only fair that you let your clients know they'll need to find a new company to order through. But even if you run a retail or restaurant business, let your customers know what's going on, especially the regulars who might have been supporting you for quite a while. Give them a chance to say goodbye to and with you. You can even have a special event, public or private, for employees and favored customers.
9. Finish any projects or contracts.
Sure, you could close up shop in the middle of the night, stop answering phone calls and leave all your clients in the lurch. You might even legally get away with it. But why would you want to? Go out with class, and leave that totally awesome network of connections open to you in the future. You never know who might come in handy to know, later on. Whether you're starting another business, or simply looking for a new job, a nice thick Rolodex is wonderful to have.
10. Split up the profits, and say goodbye.
Once you've finished all outstanding work, sold your assets (including, possibly, the building or space) and settled all your debts, share out the remaining money between you and your partner/s. And then? Focus on transitioning into your next phase. You made this decision for a reason: to explore what comes next.
5 FAQs
1. Should I close/sell my business?
The decision to close or sell is rarely an easy one to make. Among other factors to consider are your age, life plans and the state of your business. Are you ready to retire, or looking for the next challenge? Is business just not that great? Like any other major life decision, don't rush this one. Make a point to talk it over with people whose thoughts and opinions you trust. But in the end, remember to make the decision that feels right, for you.
2. How much does it cost to close a business?
There are some fees involved, especially if you're dissolving an LLC. After all, you paid to register your business name, so there are steps and costs associated with closing it out. These fees can average a few hundred dollars, but you'll have to check with your state for specifics. Your own personal costs will depend on the debt your business carries vs. the profit you make from the sale of your assets, or the business itself.
3. How do you close a business with the IRS?
You'll need to report to the IRS every legal step you take, from dissolving your LLC to filing your last taxes and reporting the sales of your inventory. Luckily, even if you're going to attempt to close your business solo (without a lawyer or accountant), the IRS has every form you could possible need, plus a handy little checklist of their own.
4. How do I cancel a business license?
When you opened you business, you probably attained a number of licenses and permits through various agencies. Closing your business requires contracting the same agencies to terminate your registration with them. The first step, obviously, is to make a list and gather together every permit and license you have. You'll have to contact each separate agency and go through their process to close or terminate each license.
5. How long does it take to close a business?
Done properly, actually closing your business can take months. It's a long process, a bit of a slog, and obviously not something to be entered into lightly. Once you've made the decision, realize that it's going to take more work before you're really finished. This is also where a lawyer and an accountant can come in handy. They can streamline this potentially confusing (and definitely emotionally difficult) process as much as possible.
Final thought
Deciding to close a business is difficult. Saying goodbye to your work, your dream, and all the people who've followed it with you, is hard. But leaving is sometimes necessary.
If closing your business is right for you, hold onto your reasons for moving on while you see it through. Whether you're retiring or just heading on to bigger things, use our checklist and others to help you close that door the right way. And then move on.
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Heather Adams is a writer, photographer & the creator of the speckled note. Say hello at [email protected]
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