6 steps to take when closing a business

| Nov 3, 2020 | Business Law | 0 comments

As a small business owner, you regularly contend with challenges like relocations, partner buyouts, and losing major clients or accounts, among many others. However, navigating through uncertainties and bumpy economic times is par for the course for entrepreneurs. Unfortunately, current times make the already challenging endeavor of successfully running a small business exponentially more difficult.

The COVID-19 pandemic has led to a sharp downturn in sales and revenues for many companies around the world. Your company might be no different. As you weave through such business turmoil, you might inevitably come to the realization that your business is on its last legs. If this is the case for your business and you are in the unfortunate position of having to consider closure, make sure you take all of the necessary steps to do so properly.

Notify clients, liquidate assets and pay employees

This is a decision that no business owner takes lightly. If you have to make this difficult choice, here are some steps you must take:

  • Notify important players: This group includes employees, customers, suppliers and vendors.
  • Sell off remaining business assets: Liquidation is essential. Examine inventory and determine what to sell and what to retain. Methods for liquidation include public auctions and sealed bids, as well as internet, retail and consignment sales.
  • Pay your creditors: You likely have outstanding bills, so take care of them as quickly as possible. By doing so swiftly, you will avoid having creditors take legal action against you.
  • Pay your employees: Arrange final payments for you employees and include severance packages, if you’re able.
  • Close customer accounts: You may have maintained some of your customer relationships for many years. Make sure to maintain those connections in case you end up working with them again someday.
  • Lay off your employees: Every part of closing a business is difficult, but this step can be especially painful. Some of your employees may have become friends of yours and you will of course still want to look out for them. Consider contacting your business connections to see if anyone within your network can provide your employees with jobs.

Closing a business may initially feel like a sad conclusion to years of work. However, for every end, there is a new beginning. You ran a successful business, but uncontrollable circumstances led to its closure. Ponder your next steps. That entrepreneurial spirit is bound to take flight again.