Did you know 1 in 12 businesses close every year?
Are you wondering how to close a business? Not to worry! In this guide, we’ll go over what steps you need to take to shut down your company.
Want to learn more? Keep reading to find out.
Get Approval First
You’ll need approval from all stakeholders unless you’re the sole owner. If your business is a limited liability company (LLC), members may have to vote to dissolve the company.
The voting procedure might be part of your operating agreement. If not, contact the secretary of state’s office to get more information.
After you take a vote, write up a resolution to put with the company’s official documents.
Is your company a corporation? You will need to organize a meeting with your board of directors to vote. If the vote goes ahead to dissolve the corporation, you’ll need shareholder approval.
If you have a partnership with others, you will need to vote together to dissolve the business. If you have any outstanding debts, come up with a recorded agreement for how much everyone owes.
Pay off Taxes and Debts
When you close your business, you’ll also have to deal with outstanding debt. Notify lenders, creditors, vendors, suppliers, insurers, and service providers. In some states, you also have to notify the public.
Once you have submitted creditor claims, create a payment plan. You can try settling with the creditor, and they might accept a smaller amount.
Tell Your Employees
You have a few obligations to your employees. Depending on the state, final paychecks could include unused vacation days. Businesses with over 100 employees must give employees 60 days’ notice.
Notify the Government
Don’t forget to tell the government, so you aren’t taxed in the future for your old business. File federal and state tax returns.
Check the box “final return” on the form. If your company does collect sales tax, you’ll need to file a separate form. You will need to pay what’s owed.
File a Certificate of Dissolution
Your state’s secretary of state office will handle this form. You need to file this legal form to close your business. Let the IRS know by sending in a liquidation or corporate dissolution form.
Depending on the state, you might need to send in a consent to dissolution or tax clearance document. This will prove your business is free from liens, and you’re up to date on taxes.
Distribute Assets
After you have paid off loans and debts, any remaining money will go to the sole owner. If you have a corporation, the assets and cash get divided by the number of shares people own.
Do you have a partnership and an LLC? Assets will get divided based on what is in each member’s capital account. These accounts hold the initial investment and profit of all the members.
Get Rid of Stock
Put everything up for sale in your business so you can make some money off the remaining items. If you have garbage that you need removing, try samedayrubbishremoval.com.au.
How to Close a Business
We hope you found this guide on closing a business helpful. Now you know how to close a business.
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