How do you shut a business down?
When a business fails, what should the owner do? What steps should they perform, to ensure all concerns are handled in an acceptable timeframe? There are plenty of guides on starting up, not so many on what to do when a business fails to ensure legal, financial, etc. concerns are addressed.
Hey Ethan. Are you an LLC or an S Corp or a Sole Proprietor? How long have you been in business? What State is your business located in? Do you have employees? Do you have company insurance? Do you have any kind of retirement account set up for them? Do you have business equity despite your thoughts of failure? IS there a way to regroup your business to make it profitable before you close it down? Do you have a CPA? Do you have a Tax Attorney? And do you have a business lawyer? If you are an LLC or an S Corp, is it Domestically filed in the state in which you work or is it Foreign Filed? IF so, what is the state of origin? What is the type of business that you run? Do you have an office or do you work out of your home with a home office? Do you have your business plan? In your business plan did you have an exit strategy developed? If not, what is your idea of how you would like to see your exit be? Do you have a lot of business debt? Have you incurred a lot of personal debt that belongs to the business? What are the catalysts you see that you need to over come to have a successful business close debt free, if that is possible? Please feel free to PM me if you have any questions regarding the plethora of questions I have asked of you to think about and to consider.
Closing a business down isn't easy as it is tough depending how much it had failed. I think, the key point you must consider first before closing the doors shut, you must be mindful if the business really has no chance to stand again as there will surely be some suggestion from a colleague and some business experts if you console one, that might help you to regain track.
Every business passes through four stages: Introduction, Growth, Maturity, and Decline.
So the question is relevant to every business or some part of every business sooner or later. Gramophone records, audio cassettes, typewriters, valve radios, and more like these have become stories of the past. These however have taken new forms, but business related to the previous had to be closed. Another times, government policies may impose a shut down for example ban on DDT. Another times, the business may have turned into a white elephant. Whatever be the reason, every entrepreneur must accept such situation as a test of entrepreneurship.
Now, to successfully face this adversary:
- List out your all your stakeholders
- List options available to strengthen the present business
- In case no such option available, list options of another business
- Safe other options would be where your procurement line, production line, and distribution lines remain somewhat the same. You have put in great efforts in building those during the Introductory Stage. You would have better chances of reaching Growth Stage of second business faster.
- Look from stakeholders point of view.
- The change would require an effective Change Management.
- List out all statutory requirements and modalities of meeting those.
- Work out your plans for Change in great details before announcing the Change.
- In execution of change just remember that your stakeholders have their stakeholders including their families. Be empathetic in your approach. Your empathy will pay you dividends in the next business.
Finally, remember throughout, you are closing a business, not your entrepreneurship.
Dr. DS Narban
Ph.D. (Psychology), MBA
You ask "how", not when , nor where.
How , depends on country/state law, normally when you have eated asignificant part of capital and there is not expected incomes to recover financial capability, there is a legal procedure to stop pay debts, and continue working, arranging agreements for debt payment.
I you accountants dont see such posibility, ask from your lawyer to start the legal closing of activity, and he will say you step by step what shall be done, there is much involved, labor force is first, tax, insurance,light ,gas, phone, loans , etc, everything must be cut off, and your responsability clean
The moment you realize your Business is making more loses than profit you need to come up with a plan depending on the your investment on the Business,if its shareholding ,you can start selling off and venturing into other Business but when owned fully,you can embark on cost reduction or closing out departments which initially were very much important but are now not cost friendly to the company.
In order to shut down business you need to make different steps & the most important is financially e.g all debts & creditors shall be finalized & close down all the books , check out with the business clients regarding their work . finally you shall close down the legal documents .
There are only TWO situations when a business can fail, wrong people in the right place or right people in the wrong place… in case of an imminent failure you are supposed (ex)change the wrong one(s)! Whatever your decision is following things must not be missed to make most out of a seemingly bad situation…
1. Evaluate all the assets, tangible as well as intangible, that form the business and monetize them. (This includes customer-base, mind you!)
2. Find a buyer, there is always one believe me, who will offer the price that would match the value you have worked out.
3. Close all the books and complete the legal as well as financial formalities to exit it officially.
4. Prepare a document ‘Lessons Learned’ that will guide you for the rest of your life.
5. Weigh your options to choose a NEW Course of your life… to make NEW mistakes if required!
All the best and Way o go...!
So you've decided to close down your business -- maybe you're not making it financially, you don't have the time or will to manage it anymore, or you're moving on to the next "big thing." Whatever your reasons for closing your business, there are a few legal tasks you need to undertake to protect yourself, your credit, and your reputation in the community, especially if you ever want to go into business again. Here are the main steps you'll need to take to shut your business down legally and minimize the risk to your personal assets:
Vote to close the business
Dissolve your business with the government
Cancel permits, licenses, and fictious business names
Pay your taxes and debts
Notify your creditors, employees, and customers
Certainly from what I see in the market as a Business Broker, the first step is to come and see someone like me, to see what we can do/salvage. There are ways and means to create value in the short-term if the owner has the appetite. If they do not, then the next step is to go to the accountant and they usually look after the process from there.