Closing Your Doors? 6 Steps for Smoothly Dissolving Your Business
Deciding to close your doors can be just as scary, if not more so, than launching your business venture. A huge decision, it should not be taken lightly. The first step in this process is to admit when it is time to throw in the towel. If your company has been operating in the red for an extended period and there is light at the end of the tunnel, it might be time to consider closing. If your focus has shifted to closing your business, the following steps will help make the process go smoothly:
- Make the Final Decision
If you are operating as a sole proprietor, closing your doors will be straightforward. However, if there are more partners involved (partnership, LLC or a corporations) a vote involving all the stakeholders will be required. Make sure a lawyer attends the dissolution meeting and documents the written agreement.
- Review Your Exit Strategy
Every business should have an exit strategy in place in their initial business plan. An exit strategy minimizes your future risks, and it ensures you get as much as possible back out of your company. Examples of exit strategies include: acquisition, selling to a buyer and liquidation. Whatever your exit strategy may be, make sure you consult with a business lawyer. Not every option will be legal (e.g. taking the money and running off).
- Make Necessary Notifications
As soon as possible, notify your employees. Don’t let them hear this news from a third party; it can quickly lead to disgruntled employees. According to federal law, employers with more than 99 employees are required to inform them in writing and at least 60 days before the closing date. You also need to inform customers and creditors. Let your customers know the last date they can make a purchase, and negotiate with creditors to lower the principal, interests and payments of any business debts.
- Liquidate Assets
A lengthy process, you will need to take inventory of all assets, raw materials and finished goods. (Don’t forget to consider intangible assets, like leases, licenses, permits, etc. You should also hire a qualified appraiser to establish the liquidation value of all your business assets.
- Legally Dissolve the Business Entity
If your business is a general partnership or sole proprietor, it may not be necessary to take legal action to dissolve your business entity. However, for other business entity types, you will continue to be liable for taxes and filings if you do not. Don’t forget to also cancel all unnecessary licenses and permits.
- Live and Learn
There are many reasons why businesses close. Over the past few years, five have emerged as the most common: poor management, poor marketing, anemic sales productivity, poor cash-flow, insufficient investment capital, hasty cutbacks and rapid expansion. Part of the closure process involves assessing what went wrong so you can learn from it, especially if you wish to pursue another business in the future.
If the sole issue your business faces is cash-flow issues (granted, this is a huge challenge), you might consider giving your business a chance to bounce back. Alternative providers like First American Merchant are willing to work with business types and industries considered “high-risk” – this includes restaurants – unlike traditional lending sources and specialize in helping business’ boost their working capital. Alternative business loans may be the answer to all your problems.
Business Funding expert, Nathan Hale, founded First American Merchant with his eyes set on helping the backbone of our country, small business owners. His passions include writing/producing music, and travel. First American Merchant is America’s Best alternative business loans company, serving both traditional and high-risk Businesses.