Deciding to call it quits can be a very emotional and painstaking process for any entrepreneur, but it pales in comparison to the potentially stressful situations caused by closing a business without adequate preparation. Therefore, it is very important to learn how to close a business properly.
- One of the most important steps is to alert all appropriate government agencies of your intent to no longer do business. For companies with or without employees, a form needs to be filed with the IRS to terminate the federal identification number. The form is very simple, and clearly states what sections to fill out when closing a business.
- Other agencies that need notification include the retail sales tax division of the state, the county or city in where the business is located in, and the state unemployment office.
- Companies with employees require a much more complex process when closing a business. For example, all payroll figures and reports should be completed and submitted to the state's Department of Revenue. All appropriate taxes should be filed according to the normal guidelines, and W2's or 1099's should be prepared as quickly as possible and supplied to employees and contractors. If the company is laying off employees, additional reports may need to be filed with the state unemployment office as well.
- Another important step in properly closing a business, is to ensure that all creditors are paid any monies that are owed. Anything pending in the accounts payable section of the company's books should be paid prior to the closure of the business. In fact, all bills and payroll taxes should be paid prior to closing any bank accounts. After everything is settled and all checks have cleared, then it is time for the business accounts to be terminated.
- Last, but certainly not least, existing clients should be notified and referred to other companies if necessary. Many previous business owners report that some of their most powerful networking opportunities have come from past contacts and customers. The individuals served by the business already know about the benefits of dealing with that particular company, and they will be a valuable resource in the event of a new venture. The existing clients will appreciate the warning that their services may be ending soon, and they will respect the company and its owners for being honest and straightforward.
Closing a business is not an easy process, but it can cause unnecessary trouble if not done correctly. For example, penalties and taxes alone are enough to stress out any former business owner. Regardless of the reason the business was forced to close, paying close attention to all the final details will make the experience a little less unpleasant.