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What to do when closing a business

On Behalf of | Sep 5, 2020 | Business Law |

Your small business has had financial struggles in the past, but you were prepared for them. With a small budget devoted to marketing, you and your team were able to map out what months and seasons customers gave your business a boost. You know your clients well.

However, those struggles grew even more so lately. The effects of the COVID-19 pandemic have been too much. Looking at the numbers, you understand that your business’s chance of survival remains slim. Although you have devoted years to your company, you make the heart-wrenching decision to close.

Liquidate, pay creditors and plan for future

Your company had a good ride when the business environment was welcoming. But now you tread on delicate territory, having to follow through and lay the groundwork to of your business. Here are some crucial steps to take:

  • Inform key participants and partners: This list includes employees, customers, vendors, suppliers as well as others who have worked with your business.
  • Liquidate the business’s assets: In a way, this is comparable to a moving sale made by homeowners. Review inventory, focusing on what to retain and what to sell. Choose different ways to sell, including consignment, the internet, retail sales, public auctions or sealed bids. Competitors, suppliers and customers are logical choices to purchase inventory. Donate outdated equipment, furniture and inventory to charities, getting a tax deduction.
  • Pay outstanding bills to creditors: Negotiate with them as best as you can and try to pay them off as soon as possible for products, equipment and related inventory. You do not want creditors taking legal action against you.
  • Close out customer accounts: Many customers were regulars, and you know them on a first-name basis. They treated you well because you treated them well. Once you close their accounts, do your best to continue to have relationships with them. They may become future customers in your next endeavor.
  • Lay off employees: This is a delicate, but necessary step. Through the years, you have built strong personal and professional relationships with some of them. This task is not an easy one. Consider taking the additional step of reaching out to business contacts and competitors, who just may offer them jobs.

You now have experienced the bookends of starting a business and closing a business. Take time to consider your next steps. Is starting a business realistic in the current environment? Are you willing to take on additional risks? Think through this carefully. You will make the right decision.

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