Businesses close up shop all the time — owners die, partners have a falling out or the market changes unexpectedly and spells the end of what once was a thriving company.
While there are many steps involved in closing a business, you can start by trying to settle the company accounts.
Keep the following things in mind:
1. It’s time to collect on all the outstanding debts you are owed. If you regularly extended lines of credit to your purchasers, for example, it’s time to make sure those accounts are paid.
Be judicious, however, about letting other businesses know that you’re shutting down when you start to collect on their debts. Some business owners may figure that they can skip out on paying since you’re closing down anyhow. Rightly or wrongly, they may be willing to gamble that you won’t be in a position to collect if they stall until after your doors are closed. Because of this, it may be wise to start winding up accounts a few months before you formally announce that the company’s closing.
2. It’s also time to settle the outstanding debts you still owe. Depending on the type of business entity you ran, you may be required to send your creditors some advance warning that you’re closing shop so that they can make any claims for compensation that they feel are necessary.
If the business is closing while still solvent, you may not have any problems settling up. However, if the business has been failing for a while now, you may not have the funds to pay every creditor you owe in full. Under the circumstances, your creditors may be willing to accept partial payments since the business entity generally protects you from personal liability.
Until you finish these two steps, it can be impossible to get a handle on whether or not your business will have anything left over or go into a financial hole in the end — and there can be enormously different consequences when it comes to taxation and other final tasks depending on the results.
Just like a successful opening, closing a business successfully requires a well-considered plan — which means that it’s never a bad idea to get an attorney on board for the process. An attorney who is experienced in business law and commercial litigation can provide more information.
Source: FindLaw, “Necessary Steps to Dissolve Your Company,” accessed June 28, 2017