Sadly, due to the Covid-19 crisis, social unrest, and sweeping shifts in how we do business, many companies are facing closure. It can be hard to know where to begin. What do you do when you see the sum of all of your hard work and source of income in jeopardy? Your best bet is to take a breath, roll up your sleeves, and get to work. The feelings may always be there but how you handle the closure of your business can influence your financial future and the next phase of your life. You want to make conscious, proactive decisions with a full understanding rather than reactions based on fear or sticker shock.
- Make the DecisionPhoto by mentatdgt from Pexels
This may sound obvious but there’s a lot at play. There are more options than just closing your business. You can scale down your business, downsize some business assets (i.e. your office, location, staff etc.), or consider getting bought out. You can sell what’s left of your business to a competitor to keep your employees working and recoup some of your investment. You could even consider a merger. The options are limited only by your means and imagination. But if you are closing that needs to be a fundamental choice you make for the sake of your financial and mental health.
- Get a Clear Financial PicturePhoto by fauxels from Pexels
Look at your finances. Investigate any outstanding debts. Eliminate any expenses you no longer need like subscriptions, services, rent, and any pending annual payments. Take stock of any orders, upcoming payments, and accounts. Be sure to track down any pending and unpaid debts. Cancel any orders or potential scheduled shipments or payments planned for later in the year. Once you have a clear picture of your cash flow you’ll want to look at what you will need to pay out to employees, debtors, and vendors. Investigate the financial and legal ramifications of decisions like breaking a lease, switching vendors, ending contracts, and formally dissolving your business. You will also want to make a list of all of the accounts in the name of your business, all of your websites, addresses, any registrations and licenses, and any other ties to your business.
- Consult a LawyerPhoto by energepic.com from Pexels
Consult with your lawyer about what the closure of your business means to your employees, debts, and your liability. Confirm what you are required to pay out and the details of your company closure. Will you be filing for bankruptcy? Formally dissolving your LLC? This meeting will help you get greater clarity of your full financial picture. It will also help you understand your options. You may close your storefront but not your online business. That’s vastly different than fully dissolving your LLC and having to pay out any investors. You’ll want to review all your options with a lawyer to fully strategize.
- Don’t Forget the Tax ManPhoto by Pixabay from Pexels
Decisions you make as you close your business can have a lasting impact on your business’s final taxes and your credit. You will want to include any potential tax ramifications, penalties, and benefits you may be eligible for into planning your next steps. You can check out this Closing a Business Checklist from the IRS for helpful tax and financial issues.
- Give NoticePhoto by Fox from Pexels
You will want to give notice to your clients, employees, vendors, and premises. You’ll want to eliminate as many expenses as you can leading up to this point. If you missed any pending orders, shipments, old subscriptions, or business you’ll want to ensure they are cancelled or taken care of. If you plan correctly, you may be able to recoup some money and avoid being liable for any charges. You also can help everyone involved plan ahead. Your employees, vendors, and even your customers will appreciate the update so they can plan their next move.
- Review Your ValuePhoto by Lukas from Pexels
Just because your company is not flush with cash does not mean it has lost its value. You’ll want to take a look at all of your assets. These can be physical (i.e. technological equipment and inventory) and virtual (i.e. subscription content, leads and email lists). There is gold sitting in your business if you know where to look. You should plan to utilize every effort to recoup your investment and weather the dissolution of your business with a strategy. You can still make some money to help soften the financial blow and ensure you retain some value.
- Reduce, Re-sell, Re-cycleJust because you’re out of business does not mean you have stopped selling. You will want to look out for ways to sell old office equipment, technology, and inventory. You can consider selling any computers or equipment yourself or through third party vendors like Talented Technologies. You can also look into recycling any physical assets by donating them. You can use this as a charitable donation in your business taxes. You also may want to investigate how you might be able to broker a deal with your lead or customer lists. Your former clients may be grateful to have access to a different vendor and all your hard work in establishing those relationships can still bring you a few dollars to offset closing costs.
- Cancel CultureYou’ll want to cancel all permits, registrations and licenses with your business. You’ll want to close any lines of credits and accounts in your business’s name. Ensure you’ve resolved all debts. Once you’ve resolved your tax debt you’ll also want to close your EIN account.
- RebuildWhether it’s a new job, new business, or a new way of life get ready for the next phase in your career. If you’ve played your cards right you should still be in good standing with all your former employees, vendors and clients who can help in any future ventures.
With these simple steps you can turn a pretty traumatic situation into an opportunity to close your business while saving as much money as you can. You can also spare yourself some headaches and heartache.