There are a lot of business ideas that don’t turn out as planned. Maybe you got tired of doing what you loved for money or you weren’t as profitable as you expected to be. What follows are a few rules you need to know no matter why you are calling it quits on your sole proprietorship.
There are a lot of rules for small businesses, but they differ from state to state. In order to understand the technicalities of closing your proprietorship, you have to talk with the Small Business Administration office in your state. A worker there will be able to let you know what other entities need to be notified of your business closure. You may have to inform:
- The secretary of state
- Local tax authorities
- Licensing entities
If you do not contact the right groups, you may find yourself in legal trouble down the road.
Dismantle Your Business
Once you have taken care of the more technical side of ending your business, you have to start dismantling everything. You can’t really just close your company down in a day. It takes time and planning to make sure you don’t leave any customers or suppliers high and dry. You have to unload extra equipment and supplies, end your insurance and keep detailed records.
You can take care of your customers during this time by filling any final orders you may still have to complete. You also have to make sure that no new orders are able to come in. If you have a website, this means you should remove the “order online” option. Your website is a great place to let current and future customers know about your plans to close. Simply put a message about your plans to close to help spread the word. You also have to make sure to inform those customers who may owe a bill or two that their final payments will be expected within a certain timeframe. Once your business is officially closed, you should take the site down completely.
You can take care of your suppliers by paying anything you owe them. You also have to inform them to cancel any long-standing orders you may have. This notice is a polite way to end your business. It is important you remember to pay all of your outstanding bills before your company is officially closed.
You will likely have a few extra supplies left over and equipment you no longer need. You can unload these extras in a few different ways. Some businesses may find they have supplies and materials that can be donated. If you made food items or clothing, shelters may be interested in your leftovers. You can also sell any extra supplies or equipment you had. This is a great way to get some extra money for taxes and unexpected creditors related to your business.
As a business, you likely have insurance that you don’t need to carry any more now that you’re not a proprietorship. Make sure to give ample notification to your carrier about your plans to end your insurance. It is important these interactions are well-documented so if any issues rise up, you have proof of the conversations that took place.
Realistically, you should make sure this entire process is well-documented. The year you close your business, you will still have to complete income taxes. This means you must have records of the money you earned from selling supplies and equipment and filling the last of your orders. You should record the final bills you paid. Keeping detailed records will make filing your taxes easier.
If you have any questions about closing your sole proprietorship, you can get more information from business attorneys and officials from the Small Business Administration. Make sure to learn as much as you can about this process before you begin to close up shop to make it easier.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.