Shutting down the business that you have operated for countless years? Whether the end has been brought about by a desire to do something different with your life, retirement, or by adverse economic circumstances, there are a number of steps that you need to follow before it can be legally closed.
Mark Stiffler went through the same process last year, as he closed down his successful sales management firm after 25 years in business; if he can do it, so can you.
Here’s what you need to do:
1) Settle all accounts receivable
When you are in the process of shutting down your business, it is important to receive everything that is owed to you.
Do this before you officially announce your intentions, as you may have a much harder time getting your money if the payers know that you won’t be around in the near future.
In order to convince them to pay their bills as soon as possible, you can use the carrot or the stick. You can incentivize them by giving them a discount on the amount that they owe you, or you can send them a letter from your lawyer, threatening legal action if payment is not received promptly.
2) Sell everything in your inventory
When you have officially notified the world that you are going out of business, it is time to cut your losses by selling as much of your inventory as possible.
Feel free to begin the process before breaking the big news by creating a sales event with deep price cuts.
Once you have announced that you are closing your business, deepen the discounts even further, and put every asset that can be moved up for sale.
If you still have items that haven’t sold afterwards, consider putting them up on online auction sites such as eBay to get more money from them than you would get from a liquidator.
3) Notify creditors and pay debts to the fullest extent possible
If you are closing down your business due to adverse economic circumstances, chances are good that you may still have outstanding debts that you owe to creditors.
Take the money that you have raised from your going out of business sale and use it to pay off as many bills as you can prior to dissolving your business.
Advise your creditors that you have that you are going out of business when you make the decision, as you are often legally obligated to do so.
Doing this will also reduce the period of time that a creditor can come after you for unpaid debts, so don’t neglect this essential step.
4) Pay your employees
Of all the responsibilities that a business person has when closing down a company, one of the most important is to make sure that employees get everything that is owed to them.
Before you pay off any other creditors, make sure that you have the capital necessary to issue final paychecks to everyone that works for you, in addition to any other financial entitlements that may be owed.
5) Officially dissolve your business structure
The final step to winding down a company is to dissolve its business structure. For many people, this will involve a visit to a government office and paying a fee that will officially disassemble the corporation, LLC, partnership, or whatever structure was used to organize company assets.