If you have decided to close the doors of your business you have to make sure no task is left undone avoiding liability for further taxes and other payments. Closing your business will mean dealing with customers, the state and other entities.
Ideally, you will want to create a closing plan so you can cross out everything that has to be done and closely follow the steps that still need to be taken. Although the process of closing your business is quite short you should give a notice to your employees and customers.
Step 1: Prepare an exit strategy
Closing your business comes down to your decision. It is recommended to create a step by step exit plan in order to successfully close the doors of your business. Consider the best ways to notify your customers, employees, and partners giving everyone a notice before the closure. You might want to consider consulting lawyers, bankers, and accountants that will help you with legal and financial services. Whether terminating your business has been your own decision or it has been forced by the bankruptcy you are obligated to pay off your debts, severance and last payments to your suppliers. The exit strategy might limit your losses or make the closure a bit easier. Experts suggest creating an exit strategy even before going into business as it can highly influence your business decisions.
Step 2: Notify your employees, suppliers and customers
When it comes to saying goodbye to your employees and customers make sure it is done in advance. Normally you should give anywhere from 30-90 days for employees and suppliers to start adjusting to business closure. Make arrangements for final payments for your employees that will include the last paycheck as well as severance. See if you owe any money to your vendors and suppliers and make sure all final payments have been issued. When it comes to vendors and suppliers the same notice applies, make sure you have notified your suppliers in advance letting them know that further services will not be required and make sure you have paid for their services and products. Your customers were the main source of your income, as an act of loyalty let them know that your business will be closing so they can find another supplier or company that will replace you.
Step 3: Liquidate all your assets
Organize your assets by making a list of the properties, equipment, vehicles, furniture, prepaid insurance, and security deposits. When selling these items and requesting a refund for prepaid services you might use this money to pay any debts or bills or if you are lucky enough you might keep the money for yourself. You might organize auctions or sell the items online if you are lucky you can get at least 60% of the asset value back. If you are unable to sell some items due to the quality or the equipment being dated consider donating these items for tax reduction. Be careful of selling assets that have been pit as collateral before the loan is paid off and you can legally sell these items. As for the refunds, you might ask your insurance provider for a refund of prepaid services.
Step 4: Resolve all your financial obligations
In order to avoid any personal liability, you have to make sure to carefully follow these important steps in order to successfully close your business. Pay your taxes – if the taxes of your business will be left unpaid this debt can go to you personally. Make sure that employee salary taxes are paid on time and that you have kept all the records of your business expenses. Do not hide your debts – this is illegal and you might be charged with fraud. Some business owners try to take out loans in order to save their business without stating the critical status they are in, hiding debts will make you personally liable for the loan. The same goes to your assets, do not try to transfer your property or items to someone or somewhere else, creditors can easily find out where your property or company car went.
Step 5: Settle your tax and legal impositions
After you have issued the final paychecks and severance you should file the federal and state employment tax forms, if your business is in debt and unable to make the tax deposits you may ask for an extension with ATO. You will need to submit state sales tax and any other taxes you have collected while conducting your business, make sure when submitting the tax return you state that this is the final one. Your obligation is also to notify creditors so you can discuss payment plans and settle arrangements if you are struggling with your debt. You might also need to notify your government and council of the business dissolving and cancel permits or licenses you hold with the state. This should be done to avoid someone else using your business name or your permits because in the end you will be responsible for their actions.
Step 6: Dissolve your business company
Once you have resolved all your financial obligations and made sure that your debts and final payments are done you will need to do one last step. If your company didn’t take off as expected or it has served its purpose you might want to consider deleting your company name from the official register, once the name is removed the company will no longer exist. Business dissolving can only be done if there is no debt or any liabilities present. You must keep in mind that in order to successfully dissolve the business you cannot have changed the company name in the past 3 months, your business has not been threatened with liquidation, your debts have been paid off and you have not traded any stock in the last 3 months. For those businesses who do not wish to dissolve their company names you can always register for a restoration that will hold your company details for up to 6 years, but that might come with a cost.