Are you a businessman but now you are planning to end up your business because of some problems? Do not worry we have made a complete overview for you in case of going out of business. So if you are interested in our segment then don’t go anywhere. Just wait and read this segment.
Why going out of business situation comes?
This can be happened because of many things such as if you are not able to pay the required tax payments or you are getting slippery for your house or car payments. And all of your business is getting disturbed and even after trying your hard there are no chances of getting back into your previous business peak then it may give you a signal of ceasing of your business. That’s the time when you have to say goodbye to your business. But do you know that closing down a business takes more effort as compared to setting up a business? Yes, it is right. You need to do proper setups before going out of business. If you want to do it properly to end up all your liabilities then read the below portion.
What do you need to do when closing a business?
Whatever your reasons for going out of your business you have to deal with legal issues. Let’s discuss those steps which you need to do for minimizing the risks for your assets.
- Vote to close the business
- Dissolve your business with your state’s government
- Cancel your licenses and business permits
- Pay all the debts and taxes
- Notify customers, creditors and employees
Vote to close the business:
If you are working as the sole owner of your business then you just have to do self-talk with yourself that you want to do an ending for your business. If yes then go ahead. But if you are running a business as a corporation, partnership, or limited liability company then you have to follow the rules of your organization or state on dissolution. This dissolution can be done by following rules and regulations or by documenting the closing of your business. The voting can be done in various ways. Usually, two-third of owners have to agree on the dissolution of their business. If not then you cannot close it against your partner’s will. Always make sure then when you are voting or finalizing a decision keep it in written form or record it as a form of evidence.
Dissolve your business with your state’s government:
If you have been working as a corporate business owner then you have to officially show your business closing decision to government officers. The state of division has all the forms which you need to submit in case of getting free from all the taxes and fillings of your state. For example, if your state is California then you must submit a certificate of dissolution to the secretary of California. These forms make out the distribution of your business assets, disposition of your business debts and liabilities, and how you and your partner are going to dissolve your business.
In some states, you may need to fill a tax clearance form or maybe a consent form for dissolution. So before going to the state tax board, declare all of your business taxes. Moreover, the rules and forms are available on the website of the secretary of state. Plus if you were doing business in the form of partnership then you have to show that now you are no more working with each other. For example, if you have filed a statement of authority with the state’s secretary, so you must file a certificate of dissolution for dissolving your partnership. Don’t think that it’s required or not, because it’s a very good idea to have a dissolution certificate. This will put creditors on notice and your partnership will no more answerable to have debts. This is important if you are involved in a general partnership. Where all the partners can bind the partnership to a deal and all of them are liable at personal levels for their business debts.
Cancel your licenses and business permits
Even though what type of business you are running, you must apply for canceling your business permits. Because if you will not do this then anyone can use it and you will be liable to have taxes and debts on your card. For getting away from penalties you need to cancel all of your permits. For closing your permits, contact the agency that has issued your license and cancel it. Apart from this, if you were using an assumed business name then publish it in the newspaper so that people may know about it.
Pay your taxes before other debts
- Employment-related taxes:
If you had employees then make sure that you are done with your final payroll taxes and deposits. Plus file up all of your final employment tax paperwork on time. Moreover, federal and state employees should know about the news that you are going out of business. Your file should also include clearance from wage reporting returns.
- Asset sales:
If you are selling some of your business assets then you have to fill form no. 4797. And if you are selling all of your business assets then you need to file form 8594.
- Income taxes:
For income tax, you need to file an income tax return file and you may probably contact your state tax agency for this purpose.
- Sales taxes:
If your business upholds sales taxes then be ready and prepared to submit final forms and funds.
Notify customers, creditors, and employees
When you have decided completely and now your business closed decision is inevitable then inform the below-mentioned persons.
Before completely shutting down the business, you are supposed to explain your suppliers that you don’t need the supply material any more. They must be known about the last date of delivery and what products you are returning to them. And after how much time they will be paid for the goods which they have supplied. But if you are not ready to stop this supplying then you can find out some way to manage it after closing but when suppliers come to know about the closing of business then they would demand cash on delivery to you.
- Service providers:
The service providers and your business insurance company must know that on which day you are going to wind up your business. Because these service providers have to send you the final bill for your purchase of services. When you will tell your business insurance company that your business will be shut down, they would ask you about potential liabilities that may crop up after your business shut down. Be honest in that time because you may lose your insurance recovery by not disclosing any pending legal problem.
- Bank cards and accounts:
Cancel your bank accounts with your business credit cards. This close-out will help you in having good evidence against new debts and taxes.
If you have taken huge loans that your lender has given to you because they will demand a return of money from you. So before shutting soon the business you must clear your statements with your lender to avoid any police or court interference.
Tell your landlord that on this date you will be giving them the amount according to the notice of lease. At least about 30 days. Moreover, if your business is being closed before ending up your lease term then you are liable for taking the remaining payments. When you are going to break the lease it’s better to talk with your landlord because try to avoid court matters when you are suffering with business issues too.
If you have hired employees then tell them about the expectations which they were unable to meet. If you are fearing the rebellious side of employees then don’t tell all of them just give details to some of your employees and tell the rest of them before two weeks’ notice of business winding up.
Fill in your last order but then give lots of notifications to your customers that now you are no more in service. If you have taken a project and you cannot complete it then let the customer know because it will spoil your trust level in the market. You can also take help from social media accounts or through advertisements that you are no more in action.
As you know completely about the process of going out of business now so we would suggest you follow all of the above steps to follow your safety and comfort zone. There are many cases when you are unable to pay the bills. In those scenarios, there are many online guiding tools and expert lawyers which can give you some wise suggestions in overcoming these situations. We are sure that you enjoyed our segment and we have become successful in reaching out our understandable content to your knowledge.