You’ve put your time, blood, sweat, and tears into your business. You’ve had your good moments and some immensely challenging ones. Now, you find yourself wondering, “Is it still worth it?”
We all become emotionally attached to our businesses. I understand why entrepreneurs don’t find it easy to admit when they might be better off without their companies.
So, how do you step back and objectively consider if it’s time to dissolve your business?
Look For These Telltale Signs That It May Be Time To Close:
- You no longer find joy in running the business. Not every day can be roses and chocolates. But if your business constantly robs you of your self-confidence, peace of mind, and your ability to enjoy life, it may be time to separate yourself from it.
- Your business is constantly losing money. If your profitability is non-existent, how do expect to pay your bills and afford your basic needs? If your business has been a sinking ship financially for an extended period, it’s time to assess the situation to determine whether or not you can turn it around.
- Your business isn’t profitable enough to justify your continued time and energy. Maybe your company is realizing a profit, but it pales in comparison to the amount of time and energy you’re putting into your business. You may be able to handle being overworked and stressed out for a little while, but that lifestyle is difficult—and dangerous—to sustain for the long term.
- You and your business partners cannot resolve differences. You may opt to close your company if either you or your partner(s) want out of the business and you can’t agree on the future of your business.
- No one needs your products or services anymore. Some businesses simply run their course because they’ve reached their maturity. Without continued demand for your offerings, you may find it’s time to close your company.
The Right Way To Close Your Business
Before you take steps to dissolve your business, be aware that some states won’t let you close it. if you owe back taxes or are otherwise not in good standing with them. You may need to get your company back on the right track in that respect before you’ll be allowed to dissolve it. Do your homework upfront to find out what your state’s position is on this.
Assuming your business is in good standing, you’ll need to submit a legal filing to dissolve it if your business is structured as either a corporation or LLC. Most states will require you to file an “Articles of Dissolution” or “Certificate of Termination” document with the Office of the Secretary of State where your company is located. You don’t want to neglect doing this! Failure to submit the required documentation could cause you plenty of headaches. Tax liability, penalties, and other fees will accrue every day your LLC or corporation remains in the state’s records.
At the federal level, you’ll have some things to tend to, as well. You’ll need to file an annual return with the IRS for the year you close your business. And if you have employees, you must file final employment tax returns and make the associated final federal tax deposits. Lastly, don’t forget to report any exchanges of property of the same nature, character, or class (“like-kind” property) and disposing of commercial property.
Closing Thoughts On Closing A Business
To make sure you haven’t missed anything that’s required to close your business, consider consulting with an attorney and accounting professional for expert guidance. And to ensure all paperwork and reporting requirements are filed correctly (and as quickly and cost effectively as possible), consider working with a reputable corporate filing service, like CorpNet.
The decision to close a business can be heartwrenching, but the process of getting it done will be less traumatic if you take steps to do it right. I encourage you to educate yourself and tap the knowledge and expertise of trusted professional resources to make sure closing your business goes as smoothly as possible.
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.