Whether you’re retiring or just closing up shop to focus on other goals, it’s important to follow the right steps to formally dissolve your business. Otherwise, you could be opening yourself up to unfortunate financial liabilities toward the government, suppliers, customers and employees.
The exact steps you need to follow will vary a bit depending on the type of business you operate and your own unique situation, but here’s a basic checklist:
1. Notify your partners or follow the steps outlined in your articles of incorporation.
Unless you’re a sole proprietor, it’s important to do everything in writing so that there’s no question about what’s happening or when your partners were informed.
2. File the final tax forms with the state and federal government.
You need to file final tax forms — including sales taxes and payroll taxes. Make sure that you pay attention to due dates because the timelines for businesses that are closing are different than the usual tax deadlines.
3. Resolve outstanding debts both to the company and by it.
If you’re a sole proprietor, you won’t have to notify the state. All other types of businesses must file papers notifying the state of their dissolution. From that point forward, your business can’t take on new debt — and it’s time to start collecting outstanding invoices that are owed to the company and paying off creditors (or rejecting the claims). In some cases, especially if your business is closing due to financial concerns, it may be necessary to try to reach a compromise agreement over the debts.
4. Notify all other important people with an interest in the business.
It’s important to make sure that you notify your landlord if you’re in a commercial lease. Review your lease as soon as you know the business is closing to see what formal steps you need to follow and what possible liabilities you face. Make certain that you also give your employees adequate notice.
If you’re overwhelmed with the process or simply unable to keep up, a business attorney can often ease you through the process of dissolving your business while you focus on the next stage of your life.