You can compare your business to a baby; you raise it, love it, and provide a lot of nurture, hoping it’ll become something big and successful. A lot of people get attached to their businesses because of the sheer amount of time and effort that they put into them.
With that said, it can hurt a lot and even be devastating when the time comes that a business needs to be shut down. Sadly, more businesses shut down due to failure than live on.
While you should always beat your competitors in the industry, sometimes it’s not possible, or there are other things that get in the way. With that said, if you’re looking into shutting down your business for good, then here’s what you need to know.
Start By Deciding on a Date to End Your Business
Closing your business can be a stressful time for all parties involved, including employees, customers, and suppliers. However, it is important to give proper notice, if possible, to allow everyone to get their affairs in order and plan for the future.
This includes settling what you owe to creditors, lenders, and suppliers who serve your business. You may also be able to negotiate with suppliers to turn outstanding inventory into cash, which can then be used to pay off debts.
This is even going to include EIN number cancellation process too. But in the end, just make sure you set up a date; this way, you’re going to be helping yourself a lot with the timeline of what and when things need to be finished.
A lawyer can help you with this process if necessary since this can be fairly confusing.
Ensure You Have All the Info That You Need
When closing down a business, it’s important that you follow the right process. This ensures that your creditors, clients, employees, and tax obligations are taken care of.
Your first priority should be to pay off any taxes that you owe. The IRS can seize your personal assets if you don’t pay your debts. You should also inform bank accounts of your intentions to close. This way, they can cancel services or change your account details before you end your business.
Since the process for closing down everything is lengthy, you’ll have to make sure you read contracts that you’ve had in place with everyone you’ve worked with, and yes, that includes lawyers and other professionals too. There’s a lot of info you need, and there’s a lot that needs to be just right.
Prepare Your Final Statement
Whether your business closes on a small or large scale, it’s important to provide customers, suppliers, and service providers with notice. This ensures that they have a reasonable amount of time to complete any outstanding orders or payments.
You might also need to inform utility companies, business insurance providers, and other suppliers of the date you’re closing. This was already stated above, but it’s something you need to do. You just can’t ghost everyone; it’s not possible for businesses.
On top of that, even if you tell suppliers and service providers, your customers have every right to know too. Sometimes they find out when it’s too late, and you don’t want to do that.
When it comes to informing your customers, it can truly be as simple as having a social media post talking about the closing of the business. It still brings in that connection and lets everyone know what’s up.
Collect Outstanding Balances
Before you announce you’re closing your business, make an effort to collect as much of your outstanding accounts receivable as possible. Customers may not be as receptive to payment after you’ve gone out of business, so it makes sense to push for payments before that happens. Incentives can also help improve the collection of accounts receivable.
Offers like a small discount can encourage clients to prioritize paying your invoices on or before the due date. You can also implement a system of late fees for clients who fail to pay on time. Just remember to update contracts with existing clients before instituting this policy. The last thing you want to do is reach out to a collections agency, but sometimes you might need to.
Liquidate Your Assets
Ultimately, you will need to convert any remaining business assets into cash that can be paid to creditors as part of the closing process. This includes selling inventory, equipment, and even office furniture. However, some items may be tied up as collateral on loans and cannot be sold without permission from creditors.
Additionally, you will need to end any contracts with utility companies, vendors, and lenders. It’s far from pretty, but it has to be done. But on the flip side, if you don’t have any debt, then you won’t need to worry about this at all!