Closing a business can be very emotional, and if not handled correctly it can lead to financial and legal consequences later on. If you have a business that is anything but a sole proprietorship, such as an LLC, partnership, or corporation, it is a smart decision to involve a lawyer to make sure all loose ends are taken care of during the dissolving process. There are several aspects and steps involved with closing a business, and a lawyer comes in handy with many of them. You may pick and choose what an attorney helps you with, or you may have him or her take care of all of the aspects of the legal side of your closing.
Main Steps Involved With Closing a Business
Shutting down a business is much more involved than just deciding to close. Steps need to be followed so that you are protected legally and financially, and so your employees and clients are taken care of. The main steps involved include:
- A majority vote to close by board members or partners
- Fill out paperwork with government for business dissolution
- Cancel business licenses, permits, and names
- Pay all necessary debts and taxes
- Notify employees, creditors, and customers
Vote to Close
If everyone else is on board with closing, this may be a step where you do not need to involve legal counsel. However, you may choose to use a lawyer if it is a complicated situation, or if you want assistance documenting the decision with a written and filed agreement.
File Dissolution Documents
A small business lawyer can help you fill out and file the necessary dissolution documents. By legally dissolving your business, you prevent future tax and financial liabilities if someone else uses your business name. This paperwork should be filled out for each state in which the organization conducts business.
Cancellation of Licenses and Names
A lawyer can help guide you, or do it for you, on how to cancel all licenses and permits related to the business. This will help protect your reputation and finances. If the business was registered under a trade or assumed name, your attorney can cancel that registration for you through the local government.
Follow Employment and Labor Laws
Meeting with a lawyer is crucial if you have employees and are not quite sure what is involved with the closure of your business. There are laws in place that require that you give your employees a minimum amount of advanced warning. Businesses with more than 100 employees must give at least 60 days written notice, and many states have similar legislation for businesses with fewer than 100 employees. Along with giving proper notice, employers must also ensure that final paychecks are paid according to state laws, and you may be required to pay for unused leave. Consulting with a lawyer will likely prevent your employees from taking legal action against you.
Resolve All Financial Obligations
A lawyer will help you determine what taxes and debts you need to settle. If you have employees, you must continue paying payroll taxes and all income taxes for the year. You or your lawyer will need to inform state and federal tax agencies about your closure, and your employer identification number (EIN) should be closed.
If you owe money to creditors, lenders, or business associates, pay off all remaining amounts. If you are unable to do so, speak with your lawyer about your options, including filing for bankruptcy.
Closing a business can be complicated, and using a lawyer will help ensure all of the necessary steps are followed correctly and that legal records are taken and filed. Involving a lawyer from the beginning is sure to help prevent any issues once the business has officially closed.
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.