Closing up Shop: How to Close Your Small Business
Kathy Miller, PHR CPTD | Business Growth Consultant | Michigan SBDC
The decision to close your small business is never an easy one and is affected by many variables.
Life changes, environmental issues, supplier issues, and economic downturns can all play a role in the decision to end your enterprise. Once you decide to close, there are certain steps to take and some requirements you must heed. Here are two checklists to help you cover all the bases:
☑️ SBA Checklist for Closing a Business
☑️ IRS Checklist for Closing a Business
Aside from logistical, monetary, and legal issues, there are people issues to consider as well. How do you break the news to your employees that they will no longer have jobs? How do you communicate your closing to customers? What do you do with all the documentation? What considerations do you need to make to prepare for your own future goals and security?
Communicating to your employees: Let your employees know as soon as possible you are closing so they have time to prepare financially and psychologically. Assure them you will do all you can to help them secure new employment by providing reference letters and the (required) Michigan Unemployment Notice. Provide severance pay if possible and thank them for their service, perhaps with a company gathering.
Communicating to your customers/vendors: Similar to employees, let your customers and vendors know you are closing. Arrange with vendors to pay any outstanding contracts. Let your customers know you have appreciated their support and business; refer them to trusted competitors if applicable.
Records retention/destruction: The Small Business Administration and many state statutes of limitation recommend seven-year retention periods. Pending claims, such as workers’ compensation or open litigation, require retention until the claim is closed. After the record retention time frame expires, the records should be destroyed. Secure destruction of the records protects the personal information of the business owner and of the former employees.
Finally, since your small business was likely a life goal of yours, you will need to come to terms with the ending of that dream. Remind yourself of the success you have had and the goals you have met. Know that you gave it your all and it is time to move on to a new dream and vision. Seek the comfort of friends and family and consider a trusted coach or counselor to help you transition to the next phase of your future. | kwm
Still not sure if now is the time to sell? Check out our Comeback Kit to see if now is the time to think about transitioning your business.