What Happens When You Close Your Business?

If the business is liquidated, the company will close down with the loss of all jobs, but employees can claim statutory payments. When a business entity closes and no longer does business they must legally dissolve by surrendering or canceling their business.
Leaving a closing task undone can mean continued liability for taxes or payments. This closing type is called “dissolution,” closing down the business as a legal entity. The Small Business Administration’s assistance finder can provide guidance in planning your exit strategy.

If you close your business, you will have to make your employees redundant. Depending on employees you have and how long you employed them, you will have certain legal responsibilities to meet.

Closing a business can be painful. From the emotional side to logistics, it is a complex, multi-step process that requires time, energy, and money.

Sole proprietors can unilaterally decide to close down. Simply state you are closing, the exact date doors will close and perhaps suggest another business where needs can be met. Reassure customers outstanding orders will be filled. Gains and losses from selling or abandoning assets will be reported on your tax return.

Owners should seek advice on closing properly. Missing a step means liability continues. Some owners close due to retirement or debts. Closing an insolvent business with unpaid debts is complicated. Assets pay creditors by priority. Owners remain liable for unpaid debts.

If closing voluntarily, allow time to plan efficiently, meet legal obligations, and ideally, maximize profits. You may consider closing if failing and finding it hard to sell. Selling assets, paying debts and keeping whatever remains might be your best option.

Before reopening a closed business, rebuild relationships and prepare to compete again. Lapse of time means the market likely changed. Returning won’t be simple.

Formally ending the company’s existence preserves owners’ financial health after closure. Failure to close properly means potential issues. Tying up loose ends is essential.