What you need to know when closing your business
If you are preparing to close your business, there are certain things that you should be aware of. It is important to understand that closing your business, is a bit more complicated then just liquidating your stock, closing your doors and walking away. There are some very important procedures that you need to follow. Here is what you need to know when closing your business-
- Notify your employees-You want to make sure that your employees hear about the closing from you. Leaving this news for someone else to decimate is unfair to the people who work for you. It is important to understand that your employees may experience a variety of emotions, so you should be prepared for that.
- Pay your final payroll taxes-The IRS can provide you with the information that you need on how to pay your final payroll taxes. This can most often be done when you pay your regular taxes. Do not make the mistake of thinking that the IRS will not come after you because you are a closed business. They will require you to pay those final payroll taxes, and if you can't they could be penalties and settlement that will need to be worked out. This is why it is so important to make sure that you business has the money to pay these taxes, since the IRS may force you to pay them out of your personal accounts.They also have information on other aspects of closing your business. For example-If you sell any of your business' assets for a profit, then you will also have to pay capital gains tax. Keep in mind that any time business assets (whether real estate or inventory), are sold the business will have pay capital gains taxes. You can work with your attorney, (preferably one who specializes in business closings), to determine how you should sell your assets in order to benefit you the most.
- Let your customers know that you are closing your business-It just is a good business practice to let your customers know that you are closing. If you suddenly shut up shop and walk away it can create ill feelings that can be detrimental to the image of your business, future businesses and even you personally. You can inform your customers in a variety of ways such as: running an ad, personally calling clients or posting signs. It can also be helpful to refer your customers to another business in your industry, that you respect and trust. This is important to ending your business on a good point.
- Complete all needed legal procedures-There are several steps that you may need to take legally, in order to close up your business. You will have to file W-2's and 1099's, for everyone who has worked for you. Depending on the legal structure of your business, you may also need to file a corporate notice that officially states that you are closing. The only exception to this is when your business is sole proprietorship, and then you can simply close your doors without legal ramifications. You must also make arrangements to discontinue any benefits such as health and dental insurance, pension plans, and other benefits you have provided to your employees.
- Close your physical location-Depending on the type of store or warehouse that you have, you will need to take some steps that concern your physical location. You will need to arrange for power, water, gas and other utilities to be shut off. You will need to notify the proper authorities in order to cancel your business permit and any other licenses. It is important to remember that these requirements will vary dramatically from state to state, so be sure and check to see what you will need to do per your state's regulations.