Exit

Follow these steps to effectively close your business: 

1. Make the decision to close: If you are a sole proprietor, you can make this decision independently. However, if you have partners, it is necessary to obtain their agreement. Follow the guidelines outlined in your articles of organization and create a written agreement. 
2. File dissolution documents: It is crucial to legally dissolve your LLC or corporation in every state where you are registered. Failure to do so may result in continued tax obligations and filing requirements. Obtain information specific to your state from the Secretary of State, Business Bureau, or Business Agency websites. 
3. Cancel registrations, permits, licenses, and business names: To protect your finances and reputation, cancel any registrations, permits, licenses, and trade names that are no longer necessary for your business operations. 
4. Comply with employment and labor laws: Refer to the Department of Labor's Worker Adjustment and Retraining Notification Act (WARN) to ensure proper payment to employees after the closure. Familiarize yourself with other relevant federal and state laws governing employment and labor. 
5. Resolve financial obligations: Take care of any outstanding financial obligations, such as filing final income tax and sales tax returns. Cancel your Employer Identification Number, inform federal and state tax agencies about your business closure, and consult the IRS checklist for instructions on completing the necessary steps. 
6. Maintain records: Be aware of the legal requirements for record retention, including tax and employment records, as well as other pertinent files. General recommendations suggest retaining records for a period of three to seven years.

After careful deliberation, you may reach the decision to sell your business. To ensure a comprehensive approach, it is essential to engage in sound planning. 

To establish a monetary value before approaching potential buyers, utilize business valuation techniques. The Appraisal Foundation offers resources to assist you in conducting a self-evaluation and gaining a deeper understanding of the processes involved in business valuation appraisals. 

Thoroughly assess the value of all assets and real estate associated with your small business, including intangible assets like brand presence, intellectual property, customer information, and future revenue projections. 

When determining the worth of your business, consider these commonly used valuation methods: 

1. Income approach: Analyze projected revenue while considering potential risks. 
2. Market approach: Compare your business to recently sold businesses that are similar. 
3. Assets approach: Calculate the total value of all assets and subtract any liabilities to determine the net value. 

To officially sell your business, it is crucial to prepare a sales agreement. This document enables the purchase of assets or stock in a corporation. It is advisable to have an attorney review the agreement to ensure its accuracy and comprehensiveness. 

Include a detailed inventory of all items being sold, along with the names of the seller, buyer, and business. Provide relevant background information and specify how the business will be operated until the closing date, as well as the level of access the buyer will have to your information. Make sure to account for adjustments, broker fees, and other pertinent aspects related to the terms of the agreement. 

Be diligent in including all assets and liabilities in the agreement to avoid any complications that may arise even after the sale has been finalized.

Many small business owners will face a time when they need to transfer their ownership rights to another person or entity. You’ll have a few different options available for doing so. 

1. Outright Sale - By opting for an outright sale, you can transfer full ownership of your business immediately and receive immediate payment. 
2. Gradual Sale - If an outright sale is not feasible for you, a gradual sale provides an alternative. This option allows you to finance the transaction through a long-term payment plan, making it suitable for individuals who may not have the funds for an immediate sale. A gradual sale offers flexibility in transferring the business. 
3. Lease Agreement - Consider transferring ownership of your business through a lease agreement. This arrangement involves committing to a contractual agreement that outlines the terms and payments you will receive for granting temporary rights to the business. 

Other considerations: 

Transferring ownership of a family business may have legal impacts, such as estate and gift tax obligations imposed by the IRS. A transfer of property would also likely require taxation. 

It’s also important to understand how to approach the exit strategy based on business type. You may want to consult with a lawyer to see which additional rules could apply. 

Implications arise for your employees, assets, and tax obligations when faced with a forced departure. 

To ensure compliance with filing requirements and taxes during a bankruptcy case, it is essential to stay informed. The IRS Bankruptcy Tax Guide available online provides valuable information on debt cancellation, tax procedures, and considerations for different business structures. 

If no potential buyers, mergers, or successors emerge, liquidating assets becomes a final strategy. However, a well-devised plan is still necessary for the proper distribution of assets to creditors and shareholders. 

Before proceeding with terminating your lease, selling equipment, or disconnecting utilities, it is advisable to consult with your lawyer and accountant. Their expertise will assist you in formulating a plan that can be presented to creditors, whose cooperation is crucial throughout this process.

Consider the following steps when engaging in the asset liquidation process: 

1. Prepare an inventory and identify assets to be sold. 
2. Safeguard your merchandise. 
3. Establish the liquidation value of assets by consulting a qualified appraiser. 
4. Utilize this value to estimate the net sale proceeds and re-evaluate your decision. 
5. Select the most suitable sale type, such as negotiated, consignment, internet, sealed bid, or retail. 
6. Determine the optimal time and location for your sale. 
7. Engage the services of an auctioneer, dealer, broker, or other experts to oversee the process. 
8. Employ a non-recourse bill of sale to transfer ownership and associated risks to the buyer.