It is important to have an exit strategy when dissolving your business. You cannot simply hang a “closed” sign and move on to your next business endeavor.
The United States Small Business Administration provides some tips, including:
- Gather and organize your paperwork. Business owners will likely need to complete dissolution documents. This is especially important if the business was incorporated as a limited liability company (LLC) or corporation. These documents are generally available with the state agency you contacted to incorporate your business.
- Get finances in order. Pay all due income and sales taxes. If you had employees, follow applicable employment and labor laws. These can dictate requirements regarding payment.
- Keep records for three to five years after closure. Keep copies of tax and employment records. Cancel all permits, registrations and business names. Cancel your business’ Employer Identification Number (EIN) and inform local and federal tax agencies of the closure.
A failure to follow proper protocol when closing your business can result in unexpected fees and penalties. In some cases, the closure may be the result of a forced-exit due to bankruptcy. Business bankruptcy may involve asset liquidation — a process that attempts to valuate and sell off assets to gain funds to pay off creditors.
Business owner that are considering closure due to differences between co-owners may have another option. In some situations, a business divorce could be a viable alternative. This process can result in the forceful removal of a co-owner.
In either situation, it is important to review the process and put together a strategy to better ensure the business is closed or transferred correctly.