Closing a Business? Follow These Steps
Aug 11, 2021 09:08 PM EDT
Are you getting ready to close the doors of your business but aren't sure about how to go about it? Many owners who have a great deal of knowledge about how to start and operate a company are in the dark when it comes to how to close up shop and dissolve a going concern. Of course, if your organization is a tiny, one-person entity that you operate from home, chances are you can end its legal existence simply. But for businesses that have one or more employees, pending orders from current customers, outstanding debts, and other loose ends, the dissolution process can be a bit tricky. It's always wise to consult a lawyer about how best to close things down while abiding by state and federal regulations. In short, here are the basics of ending a business venture that you own.
Write a Plan and Inform Employees
Make a written plan that includes all the steps you'll be taking to end operations. One of the first items on the list should be to inform any of your workers of the precise timeline. Do your best to give people at least two weeks' notice, preferably more, so they can search for new jobs. Your plan should also include a list of financial obligations, the amounts of current accounts receivable, vendors who need to be notified of the closure, and the names of landlords and others with whom you regularly do business.
Consider a Viatical Settlement to Cover Debts
Step one, after making a written plan, is to pay outstanding debts. Cash strapped entrepreneurs often decide to sell a life insurance policy to generate ready cash. And if you're ceasing operations due to an illness, you can often sell a policy through a viatical settlement, a special kind of life settlement for people who are terminally ill. The process is relatively quick and easy, but it's necessary to know how to get started when you consider a viatical settlement as a way to raise funds. A great place to begin is to review a guide on everything you need to know about this kind of life insurance policy settlement. One of the advantages is that you can use the money for anything you want, whether it's to pay off business debts, take a vacation, or cover unexpected medical expenses.
Collect Receivables and Sell Assets
Call companies and customers who still owe you money and tell them you're ending the company's operations. Let them know if they need to direct their payments to you or to a bank account you set up for the purpose of the closure. Sell any physical assets you own and use that money to pay business debts, if there are any.
File All Legal Paperwork
Consult with a lawyer to make sure you file all the necessary paperwork to shut down the company. You knew the importance of a business attorney during the startup phase and possibly that same individual can help you on the back end as well. This is a necessary formality and usually only takes less than an hour. Finally, complete any jobs that are in progress for paying customers. Once everyone is paid and all debts are settled, distribute any excess funds and assets to yourself in the form of a check, notated liquidation, excess funds.