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How do you close a business?

On Behalf of | Jan 6, 2022 | Business |

There may come a time when you’re interested in closing your business. Maybe you’re moving on to a new venture, maybe you took a job with another company or perhaps you’re just shutting it down because you want to retire.

Regardless of the reason, it’s very important to do this properly. Below are some of the steps that you’ll need to take.

Determine if you can close independently

If you have partners, you need to speak with them about deciding to close the business. Your articles of organization will spell out what you need to do. If you are a sole proprietor, you can just decide to close yourself.

File the proper documents

If you have set up an LLC or registered your business, you need to file dissolution documents. If you do not do so so, you could have future requirements and tax obligations.

Pay your taxes and debts

Any financial obligations have to be resolved at this point. You may need to pay income tax, for instance, and speak to lenders about your plans to pay off any remaining debt. You also need to notify the IRS and cancel your employer identification number.

Cancel any licenses and permits

You may have registered your business name, applied for various permits or gotten a license, such as a liquor license. You need to go through and cancel all of these so that it is clear that no one else is infringing on your rights if they use the same business name.

Pay your employees and follow labor laws

Make sure that you understand what you’re required to do as far as notifying your employees and getting them the last payment. How you decide to tell them about the closing is up to you, but it’s often best to tell them sooner so that they can take steps to prepare for this change in their own lives.

Getting everything right

It’s incredibly important to follow all of these steps and to adhere to all laws and regulations regarding your business entity. Do not skip any steps or try to rush through this just to close the business. Make sure you know exactly what you’re obligated to do.

Furthermore, the above only applies to strictly closing the business. If you decide to leave it to an heir or sell it to a third party, there will be other steps that you need to take.