Closing Your Small Business
With the lingering impacts of the COVID-19 pandemic, businesses continue to face numerous challenges. For a small business, weathering shutdowns, fluctuations in profits, and labor shortages may have taken a toll. Making the decision to close your business is never easy but once made, you can begin moving in a more positive direction. Find out more about the steps you will need to take and how filing a business bankruptcy can help.
Steps For Closing A Small Business
There are numerous reasons that prompt people to want to close a small business. Having achieved certain financial or personal goals, wanting to devote more time to your family, and needing to take more time to attend to your health or that of a loved one are all common factors to consider. However, it may also be a case of not making enough in profits or finding out that your basic business model is simply unsustainable. Regardless of your reasons, the Small Business Administration (SBA) advises that there are certain steps you will need to take. These include:
- Consult with any business partners. If you are a sole proprietor, the decision to close is yours alone.
- File dissolution documents. Not formally dissolving an LLC or corporation could subject you to additional tax debts.
- Address the situation with employees. Be mindful of state employment and labor laws to avoid penalties.
- Cancel all licenses, permits, and registrations. Include your business or trade name to protect your reputation.
- Resolve outstanding debts. This includes tax debts and often proves one of the most challenging parts of closing a small business.
- Maintain thorough records. Keep a file with copies of all legal documents, statements, and correspondence.
The Internal Revenue Service (IRS) provides guidance in filing a closing tax return for your business depending on the type you own. This includes information on reporting final profits/losses and paying final employment taxes.
How Filing For Bankruptcy Can Help
For small businesses in the process of shutting down, liquidating assets and settling outstanding accounts are among the biggest challenges. You will need to find buyers for inventory, supplies, and equipment, terminate leases, and negotiate payments on past due amounts. Depending on the circumstances, you may even face challenges in paying employees final wages or satisfying tax debts.
In this situation, filing a Chapter 7 bankruptcy can help. Referred to as a liquidation of assets, it can prevent you from being held personally liable, settles accounts, and provides the fresh start you need. Steps you will need to take as part of this process include:
- Make a complete inventory of all property and assets;
- Get a valuation for any supplies, equipment, or other items you own;
- Make a list of all creditors and outstanding debts;
- Gather loan agreements, lease contracts, utility bills, and items, along with recent statements showing amounts owed.
Contact an Attorney for Help
To find out more about bankruptcy as an option, reach out to the Law Office of Harry D. Lewis. Call or contact our New York City business bankruptcy attorneys online and request a free consultation today.