If your company is a corporation, limited liability company (LLC), or partnership, in order to close the business you and your associates must jointly agree to the closure, following procedures set out in your organizational documents and/or the requirements of the business statutes of your state. Read the documents to be sure you are conducting the voting correctly, or check the rules as defined by your state’s corporate, LLC, or partnership statutes. Make certain you record your decision with a written consent form or with a resolution in the minutes of a meeting.
If you have been doing business as a corporation or LLC, you need to:
- Officially dissolve your entity so that you are no longer liable for business taxes or filings in your state.
- Put creditors on notice that your entity can no longer incur business debts.
- Complete the appropriate paperwork. Your state corporations or LLC unit — usually a division of the secretary of state — should be able to provide the necessary forms. These forms set out the disposition of your corporation’s debts and liabilities, the distribution of your business assets, and how you and your co-shareholders elected to dissolve your business. LLCs have to file similar documents, sometimes called “articles of dissolution.”
If your business is a partnership, you might need to file a form of dissolution with the state, especially if you filed paperwork when you formed your partnership. It’s an excellent idea to file dissolution paperwork whether or not it’s required, because this is a way of notifying creditors that the partnership can no longer incur debts.
If your business was retail, wholesale, or manufacturing, and you intend to sell off your business’s inventory:
- Remember that some states have a “bulk sales law” that requires you to notify your creditors before you close your business.
- You may be required to publish a notice of your approaching closure in a local newspaper.
- Inform your suppliers when they should make the last delivery, what kind of returns you are planning on making, and how they will be paid. The timing of this depends on whether you want to continue buying; some suppliers may end your credit line and insist on being paid in cash when they find out your business is closing its doors.
If you hold a permit or license with your state or county:
- Cancel any kind of permit or license that could result in your being held responsible for taxes or penalties incurred after you cease operating the business.
- If you have a business license or permit to sell, cancel these by contacting the issuing agency.
If you’re doing business under a fictitious or assumed company name:
- File a form of abandonment and publish this fact in a local newspaper.
For any business closure:
- Notify the federal and state employment tax authorities that your business is closing down.
- Inform utilities, business insurers, payroll preparers, and other service providers when to end the services and where to send the final bill.
- Inform your business insurer of any potential liabilities that might arise after the business is closed.
- Find out how to get back any deposits you may have put down.
- Close out all business bank accounts and cancel your business credit cards.
- If you have any outstanding business loans, let your lender know how you intend to pay them back.
- Give notice to your landlord as required by your lease. If you’re shutting down your business before your lease is up, you are liable for the remaining payments, though in some states your landlord might have a “duty to mitigate” by seeking a new tenant.
- Give your employees a minimum of two weeks’ notice, and if possible, more. Tell them what you expect from them until the last day.
- Your customers should be given ample notice that you are closing your business. Fill any final orders, bring projects to a close, and of course complete all your contractual obligations. In cases where you are unable to do so, let the customer know without delay and return any deposits or payments for services not rendered or undelivered goods.
Whatever reason you have for closing your business, following the proper legal steps will enable you to protect yourself, your credit, and your good reputation. Good communication is an essential part of shutting down your business legally and with minimal risk.