There Is A Legal Process To Close A Business
Closing a business involves more than terminating employees and placing a closed sign on the door. To legally close your business there is a protocol that must be followed. Here are just some of the factors you must consider.
Formal Decision Process
Only businesses that are owned by a sole proprietor have the legal right to close without following a formal decision process. If the business is owned by more than one individual, is a corporation or an LLC, a formal decision process must be completed. In many instances, this process will include a formal vote by all the ownership parties, in which a majority decision is necessary to move forward with the decision. If a majority vote is not reached, you might be able to sell your interest in the business, but you will not be able to close the business.
It's essential that both the local and federal governments be given notice of this decision. This step is especially important because it will ensure that your tax liability going forward is eliminated. If you do not provide this documentation, you could receive a future tax notice in the mail. It's much easier to send in the proper paperwork beforehand and prevent the notice than it is to receive a notice in the mail and work to have it eliminated before it reaches a point of being past-due. Each government entity will have a specific process for completing the required forms.
License and Permit Cancellation
You will also need to ensure that all licenses and permits associated with your business are canceled. First, if you decide to open a business in the future, these documents will no longer be valid so you will need to request new titles. Second, as long as the license or business is still active, you could be held liable for any issues that arise on the business property or by anyone operating under the business name, even after you thought you closed the business. Canceling the license and permit helps you protect your interest going forward.
Consult an Attorney First
To ensure that you go about this entire process the correct way, it's best that you contact an attorney as soon as you make the decision. Should you begin the process of closing your business without first consulting with an attorney, there is a possibility that you will not handle the process the correct way, which could expose you to harsh consequences long after the business is closed. Contact a corporate transaction attorney early.
Remember, there is a process that must be followed to close your business. Make sure you adhere to the appropriate headlines.