Coronavirus has hit the world hard. Thousands of businesses shut down temporarily as they have no enough reserved cash to keep going without revenue. Even many entrepreneurs have decided to close their businesses for always. If you’re going through the same situation, closing your business might be a better step to take in order to protect your business from future crises. However, it can be harsh for almost every businessman to close down their business.
Closing a business is somehow more complicated than starting a business. If you walk out without fulfilling requirements, you may risk legal disputes and unnecessary fees. But don’t worry, in this article, I’ll go with a step-by-step guide on how to close a business.
How to Close a Business in 7 Simple Steps
Complete these seven steps and close your business without worry.
If you’ve to close your business in any way, decide first whether you should end up all or not. Avoid taking any step which hurt you later. If you’re a solopreneur, you can decide on your own. But if there is an existing partner, it requires him to agree.
2. Create an Exit Strategy.
An exit plan ensures a business owner’s successful financial future. In order to create an exit strategy, prepare your personal and professional finances, consider different exit plans and choose the best option. Approach your company investors and speak to them– your exit strategy should advise them on how they’ll be repaid. After that, consider getting help from tax professionals, bankers & accountants, lawyers. Making a business exit strategy before shutting down a company can help one navigate the closing process smoothly.
3. Cancel All the License.
Business permits and licenses, registration, your trade name–cancel all of them (you no longer need). It will help you to protect your reputation and finances.
Related: How to Get a Business License.
4. Notify Your Employees.
When your closing plan is in place, tell your employees about the next step you’re going to take regarding your business and prepare yourself to answer their questions. Your staff should be aware of what’s happening in the company because it could be difficult completing some tasks, like selling your assets, if your employees don’t know anything. And it should be included in your strategy that how you will manage communication with the employees.
It’s the process of closing a business and redistributing its assets to the shareholders–the men who invested in your company. The best method to perform liquidation is to sell assets as soon as possible. It’s a pretty simple process that you can do very quickly. It includes inventory, equipment, and real estate. Additionally, before paying yourself, pay your creditors, if any.
The other method is to liquidating your business over time. In this way, you’ve cash flow to maintain your state (lifestyle).
6. Sell Your Business to the Someone You Know.
It’s not mandatory to sell your business. However, you can think about selling your business rather than closing it. If so, consider someone whom you know. He can be an existing partner, an employee or a customer, or even a family member. In this way, you can maintain an income while he can begin to run the company without any initial investment. You can also become a mentor during the transition, which makes the process smoother for everyone.
7. Inform Your Customers.
Last but not least, inform your existing customers and clients about the closing of your startup, or it’ll continue with a new owner. If you’ve sold your company to someone, introduce him to your clients. You can also give your customers the best alternatives present in the industry.
Closing a Business in 1 Minute
The main highlights on the closing of a business are:
- Decide to close your business. If you’re a partner, make sure to convince others to do so.
- Create an exit plan. And approach your company investors and speak to them on how they’ll be repaid.
- Cancel all the licenses you no longer need.
- Tell your workers about the closing of your business.
- Perform liquidation process. Sell all of your assets.
- Prefer selling your business to closing it. Although, it’s not mandatory.
- Inform your customers and give them the best options.
It’s not easy for every entrepreneur to close his business he built working hard. He had so many dreams he had to fulfill. But you never know which turn performs the best. Everything happens for the best. Sorry, where have I taken you? So, follow these seven simple steps I’ve given above in order to close your business legally that you don’t get into trouble while doing it.