Key steps and considerations for a smooth business closing
Cover your bases if you determine that shutting your business down is a better option than transitioning ownership.
Your business is humming along, but you’re starting to feel pulled toward another role in life, such as a new career move or retirement. You may consider selling the business or transitioning ownership to a family member or leader on your team. Or you may decide that it makes the most sense for you to simply close the business as you move on to the next chapter in your life.
Shutting down the business you’ve built requires more than simply ceasing operations. Here are a few of the key considerations to prepare for closing your doors for the last time.
Are you sure closing is the right decision?
Before you commit to moving forward with closing your business, ask yourself:
Are you still passionate about the business, even if you don’t want to be responsible for it? If so, consider keeping the business alive by transitioning ownership to a family member or management team member who’s interested in taking the helm. If you can’t imagine the business existing without you, closing may be best.
Is the business successful, or is it struggling? If revenues look good and the business is poised for growth, consider selling to an acquiring company or a private equity investor. If you aren’t meeting revenue goals, buyers’ interest could be difficult to come by, and you may be better off closing and cutting your losses.
- Are you unhappy as an owner? Ownership isn’t for everyone, and the demands can take a toll on your finances, your personal life, and even your health. If stable employment looks more attractive to you, or you’ve got all the financial pieces in place for retirement, give yourself permission to close for good.
If it’s time to close, follow the right steps
Closing your business will impact your employees, customers, and family. It can also have a lingering impact on you if you don’t follow the appropriate procedures. Make sure to take care of the following items:
1. Collect payment on any outstanding accounts: Start this process before you announce your intentions to close, so your customers don’t try to wait out the business closing.
2. End on a high note with clients: Deliver on commitments already under way. When appropriate, contact clients in person to let them know of your intentions to close, and craft a genuine email to thank all your customers for their business. If possible, refer your loyal clients to another provider who can continue to fulfill their needs after you close.
3. Take care of your employees: Give your employees enough notice so they can find new opportunities, and offer to write letters of recommendation as they pursue new positions. Clarify your target date for formally closing, and let them know when they can expect their final paychecks.
4. Sell your inventory and business assets: Offer attractive discounts as you seek to offload any remaining inventory and assets such as office furniture, computers, and equipment.
5. Pay outstanding debts and issue final paychecks: Notify your bank and any other creditors of your intention to close, and make a plan for paying off your debts as needed.
6. Submit all the appropriate tax forms, file final returns, and make your last tax deposits: Consult this checklist from the IRS to be sure you’re covering all your bases.
7. Collect and distribute any remaining cash and assets: After employees, loans, taxes, and debts have been paid, what’s left goes to you and, depending on how your business is structured, potentially your co-owners and shareholders.
8. Cancel business services and accounts: Close your business bank accounts and cancel business services, utilities, and licenses you no longer require.