Five Tips for Closing a Business
Closing a business may not be as difficult as opening one, but it is nevertheless a complicated process. Removing yourself from legal and monetary involvement and filing the appropriate legal forms are both important steps in the process.
When closing your business, you will most likely need the help of both an attorney and an accountant. These two hired professionals can help you to remove yourself from the business entirely, leaving no loose ends that can come back to harm you later. This includes cancelling B2B agreements, ending leases and cancelling standing product orders.
The accountant can assist with taking care of the last payments to employees and how long to keep business insurance in place once the business is closed. Even with the business gone, there will still be a number of tax filings that you will be responsible for, particularly if you had employees. The accountant can help you to file the final tax return or returns, depending on what time of year you go out of business. You may still owe more than one quarterly tax payment.
Keep Your Records
Filing out tax forms properly, including marking the payment as the final tax payment for the business and notifying the IRS of the address where the payroll records will be stored, is imperative when closing a business. To avoid problems later, keep all of your records even after closing. The IRS recommends keeping payroll records for at least four years. Some experts recommend keeping payroll records for seven years. Keep your business’ tax records for 10 years. If there should be an audit, lawsuit or other problem, your records will be there to back up your claims.
Inform Local Government
You obtained a business license locally to do business in the area, and to end that business, you will need to inform the same department that issued the license. The exact procedure required will vary from region to region, but you will likely need to file paperwork with the county that confirms the closing of your business. This is often done for tax reasons and without that filing, you may get another local tax bill in the mail next year. If you are unsure which county department to go to, call the local chamber of commerce and inquire about your closing requirements.
Cut Loose Ends Cut Loose Ends
To exit from the business as cleanly as possible, make sure that all of your business debts have been paid and that you collect the debts owed to you. Vendors should be satisfied and customer accounts should be caught up. Don’t forget to factor your payments to your attorney and your accountant into your final business debts.
If you have business property to sell, including computers and business furniture, these must be sold and the money earned reported to the IRS before your tax involvement is truly over. If you want your monetary involvement over at the end of the year, sell off the business property as soon as possible. This also reduces the amount of time you’ll need your accountant on hand to handle final business income and taxes.
Inform the Public
Once your plans to close your business are solidified, you may need to take out an ad in the local newspaper to inform the public that your business is closing. Be sure to keep a copy of the paper in which the announcement appeared in case of lawsuits later. Once your business is closed, anyone will be free to open a business in the same name. By informing the public of your closure, and keeping copies of your ad and other business records, you can avoid any legal problems that may be directed at you because of another business’ actions.