At some point, small business owners come across a difficult decision: whether to close down the business. The decision to do so might be related to financial difficulties, or personal life changes. The problem is that shutting down a business is just as complicated as starting one. Several procedures must be completed before a company can be legally dissolved. If you are considering closing your business, keep in mind the following considerations.
Do It by the Books
Businesses that were formed with a corporate structure or partnership will require special handling. The closure of these businesses is subject to the written agreement that created them. For partnerships, this usually requires giving formal notice to the other partners. A corporation or LLC will have to adhere to the dissolution rules detailed in the agreement. This may require voting and other specific actions before the entity can become dissolved.
Do the Appropriate Filings
LLCS, partnerships and corporations are created through the state. Thus, they must also be dissolved through the appropriate state authority. This is usually done through the filing of dissolution documents. Depending on the jurisdiction, other requirements may also be applicable before the local government will recognize the termination of the business.
Close Out Tax Obligations
Every business owner should be well aware of the federal and state taxation process. Closing a business does not automatically end any tax obligations owed. Make sure you close out any pending income tax, payroll tax and sales tax. Note that different taxes are due at different times. It is a good idea to work with a business law attorney to make sure all the filings and deadlines are met.
Inform Creditors and Close Accounts
Creditors are always interested parties in the closing of a business. Most likely you’ll need to notify a slew of creditors including insurance agencies, suppliers, banks and independent vendors. Some states will even require the business to give notice through a public posting or newspaper. It is important to work with the creditors during this stage to ensure that all unpaid debts are settled before the closing date.
It’s likely your business has some sort of licensing in order to operate. You will need to notify the authorities that the licenses need to be terminated. This is an important step because it prevents others from conducting further business in your name. You can use the help of a law firm that deals with licensing and permitting matters.
Deal With Assets
Most businesses will have some sort of assets at the time of closure. This could include property, machinery or inventory. These items will need to be distributed once all creditors have been paid. Usually, the assets will be divided in a fair manner among any stakeholders in the business.
These are only some of the considerations that are important when shutting down a business. There are many other aspects to the process that should be handled as well. If you need assistance terminating a business in Utah, contact Spencer and Collier, PLLC for help.