No one wants to plan for the worst case scenario, but according to the SBA, only half of small businesses with employees survive at least 5 years. This means that half of them do not. Planning to be in that half is not the goal, but being prepared for this unfortunate scenario is wise.
What steps should you take if you see your business is not going to come back to life?
Notify Your Employees
Give them as much information as you can to respect their time and their needs. Give them an end date as soon as possible, and let them know how final payroll will play out.
They are going to need to plan for new jobs, new insurance, and so much more. Do whatever you can, whatever is within the realm of possibilities for you in your circumstances, to help them out.
Notify Your Customers
A sign on the door will suffice for most. If you are having some sort of “going out of business sale” and call it such, that will get the message across.
It might be nice to notify loyal clients or customers personally, depending on the type of clients your serve. If you cater, you will want to let your regular deliveries know. If you sell children’s clothing, they will figure it out by the going out of business sign.
Be sure to properly announce things on any social media or web storefronts as well.
Don’t Ignore the Legal Stuff
You will have to file dissolution documents. In addition, things such as licenses and permits will need to be cancelled, as well as the business name.
Taxes are another legal issue when dissolving a business. Make certain you do it right. You do not want to mess with the IRS on this.
It is wise, despite the financial issues, to get professional legal and tax help when it comes to shutting down a business. Whatever it costs, messing it up because you tried to do it on your own could cost more in the long-term.
Make arrangements with debtors, unless you can pay them off with the liquidation. Make certain final payroll goes as planned, and remember there will still be a tax obligation for the year.
Whatever you do, do not ignore financial obligations. This is difficult because if you are shutting down your business, finances are probably an issue. Ignoring obligations will only make these issues worse however, so stay in contact with debtors and make what arrangements you can.
Close Accounts, and Keep Records
Taking the funds out of your business accounts is not the same closing them out. If you do not formally close them, the financial institution may charge fees that can build into sizeable debt over time.
Record keeping is important as well. Check with professionals to determine which records need to be kept and for how long. Some may need to be stored for up to 7 years.
Closing a business is no fun. Financing may help you before you get to that point.
Biz2Credit’s extensive network of lenders offers a broad range of financing products for various situations. Stop by Biz2Credit.com today to see what we can offer you.