Close a Business

Tips on Doing It Right

  1. Seek Professional Advice
    Use the expertise of a business lawyer or business adviser, or consult an insolvency practitioner.
  2. Smart Exit Strategy
    Look for the simplest exit possible that leaves the owner, with no long-term liabilities or responsibilities.
  3. Seek Advice From a Good Tax Accountant
    Maximize the amount of money you can legally leave the business with taking into consideration your personal tax position.
  4. Plan Your Exit
    The longer you prepare for business closure the better the terms. 
  5. Business Closure Is Not Failure
    Businesses fail, not entrepreneurs. If you can learn lessons and gain a greater understanding from the experience, you will be in good position the next time you are ready to go into business.

20 Action Steps to Closing the Business

  • Vote to Close
    For corporations and partnerships, vote to close the business based on state business statutes. (This does not apply to sole proprietors.)
  • Dissolve Your Business Officially
    Obtain a "tax clearance" and file the required forms, such as a "certificate of dissolution."
  • Cancel State, County or City Permits and Licenses
    Examples: Seller's permit, business license, and fictitious or assumed business name.
  • Cancel Your Lease and Insurance Policies.
  • Collect Outstanding Accounts Receivable
    Do this before you notify your customers you're going out of business.
  • Notify Your Employees
    Pay them their last paychecks within the amount of time required by state law.
  • Notify Your Customers
    Fulfill any contractual obligations, if possible. Return any deposits or payments for goods not delivered or services not rendered.
  • Liquidate Saleable Inventory
    Consider a "going out-of-business" sale.
  • Make Final Federal and State Payroll Deposits.
  • Submit Final Sales Tax Forms and Funds Due Up to the Closeout Date.
  • Notify Your Creditors: Suppliers, Lenders, Service Providers, and Utilities.
  • Comply With "Bulk Sales Laws."
  • Settle or Pay All of Your Business Debts
    Money owed to your landlord, bank, suppliers, utilities, and service providers.
  • Get Letters Stating That Your Bills Are Paid in Full
    Do so as you pay off each creditor.
  • Cancel Your Business Credit Cards.
  • Sell Business Assets
    File IRS Form 4797, Sales of Business Property or, if you sell the bulk of your business assets to one buyer, file IRS Form 8594.
  • File Your Final Employment-related Tax Returns
    IRS Form 940, IRS Form 941, state tax withholding and wage reporting forms.
  • File Your Final Income Tax Returns
    Check the box stating that this is your final return.
  • Leave Contact Information
    Tell former business contacts, colleagues, and employees.
  • Close Your Business Bank Account.

One of the biggest mistakes you can make is to rush closing the business. Take the time to go through each step. SBC can assist in closing a business.