This isn’t the type of article we love writing. Sadly, as the global COVID-19 pandemic wreaks damage to the world and our institutions strain to cope with it all, scores of companies are facing the excruciating reality that remaining in operation just isn’t feasible. As terrible as it is, there are steps you need to take to ensure that the pain of closing your company isn’t even more devastating for your employees as well as your finances of computer needs to be.
In this article, we’re likely to detail what you need to do in order to make sure that closing a business isn’t any worse of computer needs to be.
Closing A Business Isn’t Just A Matter Of Locking Your Doors
It might appear to be adding insult to injury, but closing down a company involves much more than just locking the doors and selling off your equipment. It calls for taking legal and administrative steps that may vary with respect to the nature of the business and also the particular local, state, and federal laws that apply in your situation.
It’s a lot to handle — also it comes at any given time when you’re unlikely to be ready for that emotional toll of it all. However, we’re here to assist.
The Essential Do’s & Don’ts Of Closing Down A Business
Closing your business is never an easy move to make — particularly now in history. Here’s a fast rundown of the items you want to do — and just what you shouldn’t. Don’t worry; we’ll go into more detail later.
- Do: Communicate the problem with employees and customers
- Do: Make arrangements with any service providers
- Do: Notify the relevant government departments as needed by law
- Do: Speak with an attorney and/or an accountant
- Do: Create a plan of action
As for that don’ts:
- Don’t: Panic (I understand — easier said than done, right?)
- Don’t: Just lock up and disappear
- Don’t: Ignore any bills or creditors
Give Notice That Your Business Is Closing
Emotionally, this may be the toughest area of the whole process. Nonetheless, those impacted by your business’ closure deserve nothing more than your full honesty and frankness.
Of course, I should observe that if yours is really a solo business operation — either as a sole proprietor or as the lone LLC owner — the decision is yours alone, but if you have partners and/or investors, you’ll want to get everyone on the same page first.
Notifying Employees
As you likely realize, your employees ought to be the first to listen to the reality, simply because they will be the people most impacted by the closing. You’ll have to enable your employees understand what your closing date is and ensure that arrangements to give them their final paychecks are created, along with any severance pay you’re going to offer. Regarding final paychecks and severance pay, state regulations may dictate how you handle these arrangements, to have to consult an attorney for guidance.
Other essential things you’ll have to hash by helping cover their the employees range from the have to reimburse them for just about any work-related out-of-pocket expenses they've already incurred and collect the company property they may be using, for example vehicles, laptop computers, and work phones.
Have a look at the U.S. Department of Labor’s Employment and Training Administration Fact Sheet to learn more.
Notifying Customers
Your customers will also need some advanced notice of the plans. Make an announcement — a public one and something to subscribers to your customer mailing list, in case you have one — and fill everyone in on such details as just how long your gift cards will be honored for.
Notifying Government Agencies
This may vary based on your industry where your business is located, however, you will likely need to notify federal, state, and/or municipal authorities regarding your shutdown plans. Steps you may need to take include filing dissolution notices and canceling any relevant permits, licenses, registrations, as well as trademarks. Again, contact a lawyer if you’re unclear about your exact legal obligations here.
Notifying Creditors
This step generally is one of the trickier ones. How you deal with creditors in this situation is determined by your type of business and the type of debt your debt. Based on your needs, creditors might have to wait a collection period before attempting to collect, or they might be able to attempt to collect immediately. For those who have a financial consultant you are able to contact regarding your debts, now would be the time to achieve this.
Notifying Service Vendors
The paid services you use on the continuous basis — from your cleaning plan to your payment processor to everything in-between — will have to be notified of your business’ intent to shut.
Some of the service cancellations will probably be quite straightforward. Others, just like your credit card processor, may be trickier. Your processor may have put an ETF (early termination fee) to your service contract. You may be on the hook for this, though some merchant accounts and processors tend to be more generous than others in connection with this.
As for contracts together with your point-of-sale or eCommerce provider, if you’ve been paying per year, you won’t get a refund on the remaining portion of your agreement, however, you also won’t face any extra charges. Along with other software contracts and services, cancellation terms can vary, so you’ll need to ask your vendors questions about anything you’re unsure about.
Close Up Shop For Real
As your business approaches its final operational day, you’ll have to do what you can to wrap things up. Depending on the stock and supplies you’ll dress in hand, you should consider measures for example clearance sales to sell your remaining inventory. The quarantine policies of the area will determine whether the sale ought to be online-only.
Returning Leased Or Rented Equipment
If you have any hardware or other equipment that you’re renting or leasing, it'll need to be returned (and you might want to monitor your tracking numbers for anything in the mail). In the case of charge card terminals, you may need to be especially careful — any free equipment needs to be shipped in a timely manner, or else you might be hit with a few outrageous fees. See our article on charge card terminal leases to get a feeling of the pitfalls here.
Liquidating Any Remaining Assets
You’ll have to sell off the rest of the fixtures in your business as well. If, after your closing date, you have any remaining assets, you can test to sell the things online or make use of a liquidation company to obtain back a few of the value.
Luckily, you ought to be able to sell your remaining inventory online — and when your warehouse is still full of stock, you have the option of contacting a merchandise liquidator.
Closing In the Property
Finally, you’ll have to take the step of coping with your lease. Contact the property proprietors to arrived at an arrangement for doing this. When the property belongs to you, you may not need to take immediate action, although the cost of property may go down in the months ahead.
Deal With Your Business’ Outstanding Financials
As you close up shop, you’ll have to deal with any outstanding necessity you've. You might have several such concerns, which is why an order of resolution is vital.
Collecting Any Outstanding Accounts Receivable
Many businesses might have outstanding balances owed by clients. While this obviously isn’t an ideal time for you to attempt to collect on balances owed, it’s only getting harder came from here, so you’ll would like to try to gather now if you've any hope of simply because money again.
If possible, gradually alter collect before your official going-out-of-business announcement so that your clients don’t believe that they are able to just wait for you to definitely disappear. Offering discounts to people who pay immediately may also be wise, as it increases the likelihood that you’ll get at least some of a refund.
As it turns out, you do have an alternative choice in this situation: you can sell these balances for an factoring invoices company. Take a look at our explainer article on invoice factoring if you’re curious regarding how it works.
Filing Income Tax
At this point, you’ll need to complete one last income tax filing. Read our complete help guide to small business taxes for more information. And for additional tax tips, have a look at our tax tips for small businesses.
Remember this process will vary based on whether your business is an LLC, a sole proprietorship, a corporation, etc.
Filing Sales Tax
Likewise, you’ll have to do your final sales tax filing. We’ve published a small company sales tax guide for all those interested.
Dealing With Payroll
This step calls for making out your final checks for your employees, completing payroll taxes, and issuing severance pay. Again, you’ll have to follow federal, state, and municipal laws regarding your workers’ final checks and severance pay.
Your final payroll should resemble your year-end payroll. Therefore, here’s helpful tips for doing all of your year-end payroll.
Paying Any Outstanding Debts
Your debts will need to be paid before you claim all of your remaining financings. Repay your loans and all other bills towards the greatest extent you can.
Monitor & Keep Records Of Your Business
So you’ve completed the closing process as well as your business’ shutdown is now finalized. Unfortunately, you might still have business-related matters to cope with.
The law may need you to definitely keep your financial records and tax filings for any certain period of time. Consult an attorney or CPA if you’re unsure what you need to keep and for how long.
You should also monitor your money for any suspicious deductions from companies your company did within the past. Unfortunately, many business people find themselves still charged by providers 1-2 years after closing, so you’ll wish to nip this in the bud.
Additional Resources For Closing Your Business
- The IRS provides an online help guide to closing your company and the steps you have to decide to try do so.
- Likewise, the SBA provides a published guide to closing your business.
- FindLaw offers a help guide to closing down your business with a particular concentrate on the legalities involved.
- The legal site Nolo.com offers this 20-step checklist for closing your business.
Closing Down Your Business Isn’t Easy, But Doing It Correctly Is Important
You may not feel highly motivated to complete your research at any given time like this. This really is entirely understandable. Nonetheless, should you don’t want to find your company running afoul of employment law — and if you don’t want creditors harassing you and asking for money at any given time when you’re least equipped to deal with it — you’ll want to make a good-faith effort to shut down your company the proper way.
Again, the more complex your company, the higher the likelihood is that you’ll have to enlist the aid of an attorney and/or a CPA.
Here is a connect to our COVID-19 resource hub — we’ll be contributing to our pandemic-related informational resources on the continuous basis. You may even want to check out our Small Business Outbreak & Pandemic Guide: Coronavirus Edition for additional on how to cope with this unprecedented situation.
Looking for more help? Check out these resources from :
- How to prevent defaulting on the business loan
- Small business guide to declaring bankruptcy
- Guide to business interruption insurance
