There are many reasons why you might close your business.
Maybe you want to retire, and it’s too difficult to sell it. Maybe your business no longer has any future revenue because you created it for a specific project. Or maybe demand fell, and your business is no longer viable.
Regardless of the reason, once you’re sure that closing is the way forward, it’s best to set a date to stop trading. It places a definite end date for all your obligations.
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Communicate your plan
If you have staff, break the news gently before you close. Give employees as much time in advance as possible so they can start planning their next steps.
Document all your employees’ pay and leave entitlements so you can answer their questions.
Next, let your suppliers and customers know about your closure. You might wish to tell long-standing customers in person before placing an announcement on your website, social media or sending an email to all your customers and suppliers.
If you have a lease on your business premises that extends past your closing date, you’ll ideally want another business to take over the lease. (This might determine your closing date.) Remember: Your landlord will likely need to agree to assign the lease to someone new.
Regardless of when you close, talk to your financial institution, attorney and accountant as early as possible to seek further advice.
Sell assets and pay debts
Start selling the assets your business doesn’t need before closing. This might include excess stock and equipment you rarely use.
Once you stop trading, sell your remaining assets, like computer equipment, office furniture and vehicles. If possible, find buyers for these items before you close.
It’s then time to pay any outstanding debts, including:
- Final rent payments
- Utility bills (power, phone and internet)
- Insurance
- Supplier invoices
Cancel ongoing agreements
You might have contracts, services, direct debits or subscriptions to cancel. Some of these might require advance notice.
Don’t forget about:
- Software and online subscriptions
- Leases (commercial and vehicles)
- Service contracts
- Hire purchase or financing
Check if there are any penalty clauses for breaking an agreement early. If needed, seek legal advice.
File final taxes
Completing your final tax returns and paperwork will vary depending on your business structure.
You may need to:
- Pay employees on their last pay
- Pay final employer-related taxes
- File your final tax return
Failure to follow any of these steps could result in penalties, a tax audit or legal action. So, it’s essential to do everything correctly.
If you have a company you want to de-register, make sure:
- The company is no longer in business.
- You pay all your business debts.
- The company has distributed its assets.
- There are no creditors (people you owe money to).
Your accountant can help you.
Commence the closing down process
Contact your financial institution to decide when to close your business accounts and any business credit cards or other services.
Notify suppliers to close any business accounts you might have left open.
You’ll also need to store your business records, tax returns and other evidence in a safe place for several years in case the Internal Revenue Service audits your business.
Final thought
Closing your business is never an easy decision. But careful planning can help things go more smoothly, allowing you to move forward with your next stage.
