How to Close a Small Business

Closing a small business can be a heartbreak — putting one’s sweat and tears into the business — but sometimes it has to happen. When closing a small business, it is imperative that everything is taken care of in regard to financial information so that the IRS doesn’t come after you demanding money when you no longer have that stream of revenue to pay for it. Here are the steps to close a small business.

To begin with, let everyone know that you are closing. This includes your employees and your clients. You tell your employees so that they can begin making preparations to go elsewhere. If you’re up front with them, you’re more likely going to have help closing the business down. You tell your clients so that they can make any last minute orders. If you’re closing in three months, they might make an extremely large order to get what they need for some time. It’ll be extra revenue in your pocket to help with the closing process.

If you’re feeling extremely generous to your employees, prepare individual letters of recommendation for them so that they can use them when finding a new job. It’s a small gesture you can do to keep them feeling confident. While you’re losing your business, they’re also losing their livelihood, so it is a double negative. And in this case, that doesn’t equal a positive.

Close all accounts with suppliers and honor your financial agreements. If you owe $25,000 to an account, pay it up. Get rid of all of that debt so that they don’t come after you post-closing trying to get their money. And, it keeps them in your good graces should you ever get back into the business years from now. Give a date to your suppliers so that they can close the account on that day.

Prepare all of the tax forms for the local, state and federal payments. You want to have all of these forms ready to go so that on the last day of operations, you can file and get the taxes done. Contact your State’s secretary of state to announce your closing. This will allow them to remove you from the list of businesses. Finally, do the actual filing listing the day of closing.

Closing a small business is never fun. However, should you have to do it, be sure to do it properly. Don’t be resentful toward your employees. Keep your clients in good standing. And make sure that you cover all of your taxes so that you don’t have the IRS chasing you down later. Losing a business is horrible, but end on a good note so that it is a successful close.