The document provides an 8-step process for properly closing a business to avoid legal and financial risks: 1. Collect outstanding receivables aggressively before announcing closure. Offer discounts and sell unpaid accounts. 2. Inform current customers and fulfill contracts, refunding payments if necessary. Announce closure through appropriate channels. 3. Begin selling off remaining assets like inventory through discounts, auctions, and online marketplaces. 4. Notify creditors like banks, suppliers, and sole proprietors/partnerships of closure and request final bills according to state laws. 5. Pay final wages legally and help employees find new jobs, either giving notice or informing at closure. 6. Submit final

1. I Wish Someone Had Told Me This BEFORE I Closed
My Business (8 Steps to Close Your Business the
Right Way)
Whenthe time comes,forwhateverreason,toclose the doorson a businessventure,the processis
alwaysa bitmore involvedthansimplylockingup andwalkingaway.Thisistrue of all businessesinall
industries.There are risksinvolvedwithclosing –namelythe lossof reputation,exorbitantand
avoidable fees,andpotential lawsuits.Makingsure youdothe rightthingsinthe right orderisessential
to protectingyourfuture endeavorsandassets.
To helpwiththis,here are eightrelativelystraightforwardstepsthatanybusinessownerinany
businesscoulduse tohelpbetterprotectthemselveswhenclosingtheirbusiness:
First Step: Take Care of Outstanding Receivables
One of the firstthingsyouneedtodo istake care of any outstandingreceivableaccounts.If anyone
owesyoumoney,youwon’tbe aroundto collectafterclosingsobeginaggressivecollectionattemptsas
soonas you can afterthe decisiontoclose hasbeenmade.Here’saquickchecklistof how to do this:
1. Don’tannounce youare goingout of business,butjustmake the collectionattempts.Once
customersknowyouare goingoutof business,theymayattempttoavoidpayinguntil you
close.
2. Offerdiscountsonanyoldaccounts.The bottomline isa partial paymentisbetterthanno
paymentat all.Asthe time of your closingapproaches,youcanincrease the discountonany
accounts thatremainunpaid.
3. Don’trelyon the mail alone.Activelycall andemail youcustomersasmostpeople checktheir
phone andemail manytimesaday and mail justonce at most.
4. As a final resort,youcan alwayssell off anyaccountsyoucannot collecttoa factor. You’ll only
geta small portionof the debtyouare owedbackthisway, butagain – thisis betterthanno
recompense atall.
Second Step: Take Care of Current Customers & Contracts
Oftenbusinessownersare unsure howtoannounce theyare closingtotheircustomers.The bestway
dependsonthe size of yourbusiness.If youare a large businesswithalarge geographical footprint,
considerusingapressrelease.If youare a smallerbusiness,runningasmall statementinalocal paper
shouldsuffice.
Additionally,you’llneedtotake care of any in-progressoroutstandingworkordersorcontracts inorder
to avoidpossible complicationsoveranyunfulfilledlegal obligations.Make sure youfulfillall current
orders.If you knowthatyou’ll be unable tofulfill anorder – you needtorefundany paymentsalready
made on the jobs.If you cannotdo so immediately,workouta paymentplan.
On topof this,examine the terminationclausesof anycontractsyouare currentlyundertosee what
youneedto doto terminate itinorderto determine if you shouldattempttofulfillthe contractor
terminate it.Consultwithanycustomersyouhave suchcontractswithaboutyour situationandexplain
whatis goingon whenyouaskto terminate.

2. Third Step: Begin to Sell Assets
The besttime to liquidate things like inventoryandcompanyassets(vehicles,office equipment,etc.) is
before youclose the doors.Heavilydiscountall remaininginventoryif yourbusinessisretail.Be sure to
letall employeesandcustomersknowsothatyoucan liquidateasmuchof the inventoryaspossible.If
youare a largerbusinesswithmore substantial assets,considerauctioningthemoff and,again,
promotingthe sale toensure all youremployeesandcontactsknow aboutit.
Once you’ve closedthe doors,thatdoesn’tmeanyoucan’tkeepsellingwhat’sleftof yourequipment
and inventory.Take what’sleftonline.There are all kindsof sitestosell new inventory(Amazon) oreven
move oldoffice equipment(eBay,Craigslist,Liquidation.com).If youneedtomove warehousesworth of
inventory,there are evenspecializedsiteslikeGencothatwill buyinbulk.
Fourth Step: Take Care of Outstanding Debts
Dependingonwhatstate youare inand whattype of creditorsyouhave (bank,private,etc.),thereare
specificlawsthatwill governhowandwhenyoumustnotifywithyourintenttoclose yourbusinessas
well ashowlongyou couldbe suedforany unpaiddebts.Keepinmindyouneedtoresearchthe specific
lawsaccordingto your unique business,buthere are afew guidelinestohelpout:
 Bank Loans: If yourloanis froma bank, it’simportanttokeepinmindtheycan call your note
due or deductthe sum fromyour balance assoon as they’ve beeninformedyouintendtoclose.
Make sure youare preparedforthisto happenbefore you informabankyou have a business
loanwiththat youare closingthe business.
 Suppliers:The bestway tohandle thisisto not letthemknow until justasyou are closingup.
Thisway youcan get all the supplies,etc.youneedrightupuntil closing. Thenyoucansimply
letthemknowyou’ve closedandaskforyour final billing.
 Sole Proprietorships& Partnerships: Notifyanypartiesof thissortthat youowe moneyto of
your intenttoclose viaa letterwhere youalsoaskfor a final bill fromthem.You will likelywant
to publishnotificationinyournewspaperforanycreditorsyoumay have overlookedtoprotect
yourself againstlawsuits.
 Corporations & LLCs: Notifyanycreditorsof thissortvia a letterwiththe specificinformation
your state requires forcreditorssubmittingclaims(Be sure tocheckwithyourstate or your
businessattorneyforhelpwiththis).Include inthisletteranofficial statementthatmissingthe
deadline will resultintheirclaimbeingbarred.
Fifth Step: Take Care of Current Employees & Pay
Thisone can be a bit tricky.Be wise aboutwhenyouchoose totell youremployeesthatyouare goingto
close.Because theydependonyouforincome,tellingtheminthe wrongwayat the wrongtime can be
costly.The firstthingyouneedto dois determine how youneedtohandle theirfinal paycheck
accordingto your state.
Once you knowhowyouneedto handle this,youcaneithergive themample notice withplentyof time
to findanotherjob,orwait until the lastminute totell them.Bothhave theiradvantagesand
disadvantages.If givingnotice,you’dwanttooffertohelpthemwithrecommendationsandmake it
clearyou wantthemto succeedto motivate themtoremainloyal.The worstthingthatcan happenis
your employeesquitwhenyouneedthemaroundforthree more weeks.

3. If you are goingto letthemknowat the lastmoment,make sure youhave theirpaychecksreadyand
have followedall legal obligations.
Sixth Step: Final Deposits & Payroll
Afterpayingyouremployeesand runningyourfinal payroll,all state andfederal employmenttax forms
and depositsshouldbe made asusual.IRSForm656 isavailable if youneedtoaskfor a reductioninthe
amountto be paid.IRS Form 433-A is,alternatively,anapplicationfora paymentplanforemployment
taxes.
Seventh Step: File Final Taxes (Sales, Income, Employer Etc.)
There are a fewtaxesyoumayneedto paydependingonyourtype of business:
 Final Sales Tax: If yourbusinesssellsproducts,make sure tofile yourState sales tax formsalong
withall taxesowedatthe date yourbusinessclosed.Also,write the word“FINAL”acrossyour
form’stopand contact your state aboutthe rightwayto close your businesstax account.
 Final Employer Tax Return: If youhad employeesorcontractors,you’ll needtofile yourfinal
employmenttaxes.If youfile quarterly,use IRSForm941, if you file annually,use IRSForm944
alongwithyourIRS Form 940 or 940-EZ. Make sure to note these formsas final andinclude any
paymentsdue.Additionally,you’ll needtoissue W-2sand1099-MISCS to employeesand
contractors.To reportthese,use IRSFormW-3 andIRS Form 1096 respectively.
 Final Income Tax Return: On the final yearyou ownedyourbusiness,you’ll have some certain
requirementsonhow youfile yourpersonal incometax returns.These dependspecificallyon
howyour businessissetup:
o Corporations: On yourIRS Form1120, make sure to check the box that indicatesthisis
your final return.Use Schedule K-1toreportshareholderallocations. Additionally,your
corporationwill needtobe dissolvedwhichcanbe done viaIRS Form 996 no laterthan
2 months& 15 days afteryourfinal dayof business.
o Partnerships& LLCs: On your IRSForm 1065, make sure to checkthe box thatindicates
thisisyour final return.Use Schedule K-1toreportthe P&L giventoeachpartner.This
mustbe completedbythe 15th
of April the yearfollowingthe close of yourbusiness.
o Sole Proprietors: Unlike the othertypesof businesses,IRSScheduleChasno “FINAL”
box.All youneedtodo ismake sure to file bythe 15th
of April the yearafterclose of
your business.
Eighth Step: Take Care of Loose Ends & Remaining Assets
Once all obligationstotaxes,debts,loansandemployees,the remainingassetscanbe distributed
amongstthe owners.Howthisis distributedisbaseduponhow the businesswassetup:
 Corporations: The remainingassetsare dividedamongshareholdersinaccordance tothe
numberof sharestheyhold.
 Partnerships& LLCs: If enoughmoneyremains,eachpartnershouldreceiveanamountthatis
equal tothe amountof theircapital account. IFthere isn’tnotenoughforthis,the fundsshould
be distributedinaccordance tothe size of each of the partner’sseparate capital accounts.
 Sole Proprietorship:Anythingthatisleftoverwouldgodirectlytothe sole proprietor.
That’s notall – you’ll needtomake sure anyotherloose endsare alsotiedup.Thiscouldbe anything
fromcancelingutilitiesandlicensestoclosinginactive accountsandsubscriptions.

4. Still have questions?
Please call us for a free appointment with Miami business attorney
Yoel Molina in our Miami office at 305-548-5020.