In this post, we will enlighten you more on the procedure to take and embark on Closing A Business: What You Need To Know
Closing a business can be a really important thing to think about as a business owner especially if you’re in your business is not doing well. In this article, you’re going to find out some reasons why businesses close up, how to close your business and many more. You do not want to miss this. Let’s start with knowing some reasons why businesses close up.
Reasons Why Businesses Close Up
Here are the common reasons why many businesses close up.
- One of the reasons why many businesses close up is that many business owners fail to carve out a well-thought plan on how to set up their businesses. Many of the businesses who fall under this umbrella are caught unaware because they do not have a business plan or even if they have, they do not visit and follow it in order to be guided on what to do. So when the market experiences a change, they face the challenge and at the end of the day closes up.
- A lack of business management skills is one of the main reasons why many businesses shut down. In some cases, especially when a business is in its initial year or two of existence, a business owner is the only senior-level employee. While the owner may have the abilities to develop and market a profitable product or service, they frequently lack the leadership qualities of a good manager and lack the time to effectively manage others.
Now, that we’ve seen the major reason for How To Close Your Business and why businesses close up occurs, let us close your business.
How To Close Your Business
Here are some important steps on how to close your business.
- Prepare Your Sell Your Assets
You can start by making a list of all your business properties, furniture, and crude materials. Take pictures of each item for sale and make a list of its serial numbers and a brief description.
Leases and licenses and customer lists are all intangible assets to keep in mind. These could be in high demand and could be sold for a fee. It’s possible that you’ll need to consult with a lawyer specializing in intellectual property. Get the assets ready to sell. The objects you want to sell should be cleaned, painted, or repaired. You should be able to show off your tools.
Hire a certified appraiser to establish the liquidation value of your assets. The value of your asset is always slightly above 70% of the original retail value. Obtain this information before entertaining any offers from purchasers.
- Inform Tax Authorities About Your Closure
If you do not properly dissolve the business entity, you will remain liable for taxes and filings. It may not be required to take legal action to dissolve a general partnership or sole proprietorship, but there is no harm in informing the authorities and creditors that you are closing down. Also, cancel any unneeded licenses and permissions, as well as any business names that have been registered with the local government. After the business is closed, keep tax and employment records for at least five years.
- Collect Undue Invoices
Once your customers know that you’ll soon be closing down, many customers would not be willing to pay their debts. Make a concerted effort to collect as much as you can before announcing your closure. Offer a discount for prompt payment on those invoices that have been overdue for a long time.
- Settle Debts Your Business Might Be Owing
It is very important that you pay off any debt that your business owes before you finally shut your business down. This includes paying off firm debts and liquidating and distributing remaining assets to members and shareholders.
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Your business will be formally dissolved once you have completed settling your debts. One in which taking the right steps ensured that your small business remained compliant until the end.
- Get The Necessary Documents For Dissolution
The next step after settling debts is for you to start getting documents ready for the dissolution of your business. In every state where you’re registered to do business, file articles of dissolution or an application for withdrawal.
The necessary office must receive these documents. When they receive this, they will mostly ask basic identifying inquiries regarding your company. The method varies by country, but most will ask you for the hard documents and soft copies of them, making it quick and simple. Also note that until you officially close down your business, your business will pay the dime it owes to taxes and levies. You will not be dissolved until the state has approved your submitted paperwork.
- Pay Off And Do The Paperworks
It’s time to take care of the books and examine what’s left after you’ve taken care of the last of your liabilities. Decide how to allocate the remaining funds in the company, and then catch up on your bookkeeping to the most recent transaction. Without proper bookkeeping up until the last day of your firm, you won’t be able to take care of that final business tax filing.
- Avoid Being Filled With Regrets
This step is important because closing your business should not be considered a failure on your part. Remember the time when you just launched your business. Were you worried about failing back then? Most likely not. Instead, view it as a stepping stone to a much greater opportunity to come in.
Dissolving a business can be a difficult decision. After all, a great deal of time and effort has gone into the business, and many expectations have yet to be met. When a business is losing money or barely breaking even, it’s time to shut it down. Yes, giving up is a difficult concept to accept, but once you do, any feelings of guilt, failure, bitterness, or uncertainty about how to close a business will quickly fade. The time and energy spent on closing the business in a timely and dignified manner can then be directed elsewhere.