## A Beginner’s Guide to Closing Your Business: 8 Steps for a Neat and Tidy Exit
Entrepreneurs have faced more than their fair share of challenges these past few years, and 2022 has been no exception with inflation up and consumer spending down. Sadly, some business owners have decided to close their companies due to economic difficulties. Regardless of why someone chooses to close their business, it’s important for them to realize there’s more to the process than simply stopping selling products and services.
### Legal and Financial Considerations for Closing a Business
Closing a business involves both legal and financial considerations to ensure a smooth process. Here is an outline of the tasks that might be involved when closing a business.
1. **Check the entity’s governance documents for procedures to follow**
– Different business structures have different internal governance documents that contain provisions for handling company matters.
– These typically address what happens when the business dissolves.
2. **Verify the business entity is in good standing**
– Before dissolving a business, it must be in good standing and have followed through with all ongoing compliance responsibilities.
3. **File Articles of Dissolution**
– LLCs and corporations must file Articles of Dissolution to officially dissolve the business entity with the state.
– If the entity has foreign-qualified to conduct business in other states, it must also notify those states that it will be withdrawing from operations there.
4. **Notify external stakeholders**
– It’s common decency—and sometimes required by law—for a business to notify creditors, vendors, and customers that it will be closing.
– Some states require business entities to publish a notice in a newspaper or other publication about its dissolution.
5. **Make final tax filings and close tax accounts**
– Final tax filings and closing tax accounts are required at the federal, state, and local levels, with different requirements for different entity types.
6. **Cancel business licenses and permits**
– Businesses need one or more licenses and permits to operate legally and must inform each licensing agency of their closure.
7. **Sort out assets and debts**
– A business may have physical and intangible assets that can bring in funds to settle outstanding debts with creditors, vendors, and suppliers.
8. **Hold onto business records**
– It’s critical for business owners to maintain records in a safe place for potential future legal investigations or tax audits.
### Consequences of not dissolving a business properly
Missing any required steps for closing a business could result in the business owners remaining responsible for compliance tasks and fees. That’s why it’s important to understand and follow through on all requirements. There may be others depending on the entity type, business activities, state and local laws, and other considerations. Guidance from trusted professionals like an attorney, accountant, and tax advisor can help entrepreneurs develop a plan for dissolving their business without leaving any loose ends behind.
