I don’t think Kenny Rogers was thinking about business ownership when he sang that song, but it could be a mantra for Gulf Coast business owners.
(And if you’re not a Kenny Rogers fan, here’s a trip down someone else’s lane. Boy, 1978 was another era altogether, wasn’t it?)
Knowing when to hold ‘em – and when to fold ‘em – is a business skill not all possess, and things can unfortunately end badly when you don’t know how to shut things down well (like ending up, according to Kenny, on a train bound for nowhere).
But that doesn’t have to be you. It takes courage to call it quits, and good business counsel to make the best of what’s left.
So when it’s time to lay your cards down, you want to be able to walk away … not run.
Okay okay, I’m done with the song lyrics (for now), but I’m not done advising you on how to close a business the right way.
In fact, I’m just getting started.
How To Close A Business, Legally: Steps for Gulf Coast Business Owners
“Quitting is not a failure; it’s simply a decision to stop doing something that isn’t working.” – Tony Robbins
I’m pretty sure they don’t give classes on how to close a business in business school … as if every business owner even went to business school.
So let’s go through the process of how to close a business today, step by step, in the event you find yourself walking down this path in the future.
Of course, you only need to go through this process if you’re not selling, passing the biz off to a family member, or the business is otherwise continuing on in one form or another in your absence.
The dissolution of a business entity should be undertaken with care and attention to detail – this is, after all, a legal process. Here’s what needs to happen to legally end the existence of your business, as a general guideline…
1) Decide and Document: Formally document the decision to dissolve. The first step is, potentially, the hardest one of all. It’s a decision that takes time, and if you’re not a solopreneur, this might involve a board resolution (for corporations) or a member vote (for LLCs). Your entity designation will dictate the formal process to officially call it quits.
2) Tell Stakeholders: Inform relevant entities. Here, we’re talking about informing creditors, employees, suppliers, customers, and any relevant government agencies (IRS, state, licensing agencies, etc.) about the dissolution. Obviously, order is important here for preserving relationships and helping people plan for what’s next.
For banks and suppliers, your notice should include a plan for how you’re going to pay them what they’re owed. For employees, there are legal stipulations to follow regarding appropriate notice and severance pay so be sure you’re compliant there.
And for customers, be sure to provide them with information about any outstanding orders, refunds, or warranties.
3) Pay Your Taxes: File the proper returns and pay the government. The next step in dealing with your financial obligations is to file final tax returns (federal, state, and local) and settle outstanding tax debts. In addition to what your tax returns show, don’t forget about sales tax, employment tax, and any penalties and interest.
It’s in your best interests to work with a tax professional to make sure nothing gets missed here that will come back to haunt you later.
4) Settle Your Debts: Pay everyone else. Then it’s time to pay off all outstanding business debts, including loans and accounts payable. If you’re unable to pay everything in full, you might be able to negotiate with creditors to reach settlement agreements.
Though in extreme cases, bankruptcy may be a viable option to restructure debts or liquidate assets.
5) Distribute Assets: Sell, liquidate, or distribute remaining business assets. This only comes after all outstanding debts have been settled. You can sell or dispose of any remaining inventory and equipment. Any real estate owned by the business can be sold or leased. And don’t forget about intellectual property – transfer or sell any intellectual property assets, such as patents, trademarks, or copyrights.
6) File Articles of Dissolution: Formally tell the state you’re closing. Officially called “Articles of Dissolution” or “Certificate of Dissolution,” this filing will formally dissolve the entity. Pay attention to any deadlines set by your state for the filing of these dissolution documents.
7) Pay Attention To Recordkeeping: Maintain business records for a certain period as required by law. This includes financial records, tax returns, contracts, and employee records. Be sure to follow state and federal laws for specific record retention requirements.
Seek professional help throughout this process for advice and/or physical assistance with filings, communications with government agencies, and the like. The process of how to close your business isn’t a simple one:
(251) 666-5551
Nor is it speedy. Remember, all of this takes time, so don’t expect to wrap up the complete dissolution of your business quickly. It took time to start your business, and shutting it down will be more of the same. Documents take time to be filed and recorded, and assets take time to sell, but eventually, what’s left of the payout (if any) will make its way to your account.
And there’ll be time enough for countin’, when the dealin’s done. ?(I couldn’t resist.)
But all kidding aside, I’ll be here for you too.
James Thomasson
