Closing a Small Business

by Ed Martin on October 30, 2009

One of the hardest things you have to do as a business owner, no matter if it is a microbusiness, a freelance or home business or a larger enterprise, is to close up shop and end the business. You’ve put in untold time and work with equal parts blood, sweat and tears to start and build a successful business. You’ve worked hard to get customers and to keep them happy. You’ve sacrificed to follow your dream, and probably everyone around you has too. And now you are faced with the prospect of having to close the business.

What Should You Do?

Before you do anything, get some help. You are emotionally involved. I know. I’ve experienced it. There are people you can talk to and get advice from for free. Make an appointment at your local Small Business Development Center or SCORE office. Seriously, these are experienced, good people who want to assist, no matter how large or small your business is. There is no guarantee that they’ll help you find a way to keep your business open, but they will help explore options. There are SCORE and SBDC offices in every state, and some even do on-line counseling.

The Decision to Close

I said closing a business was a hard thing to do, but making the actual decision is actually pretty easy. Gut wrenching, but easy At least it was for me. There comes a point when, financially you just have to stop. For some there might be one specific trigger event, but for others there may be a gradual slide down an ever steepening slope. Either way, there comes a day when you hit the bottom and have to make the decision

How to Do It

For some people, closing up is easy. Plenty of freelancers, home businesses and sole proprietors have no inventory and no employees. They just have to finish up their contracts and stop. If you have any kind of license or permit you should cancel them. If you have a fictitious name you should cancel it as well. You should notify all the people you do business with: customers, suppliers, banks and the like. This is all pretty straightforward.

If you have employees, or have formed a corporation or partnership things get hairier. You need to plan for your closing just as you planned for starting your business. There are plenty of legal niceties that must be observed. You’re going to need some help, so get your lawyer and accountant involved. If you had help starting your business, you’ll probably need the same help closing. The IRS has an excellent checklist to follow. NOLO has a good checklist as well.

What about You?

Like I said, closing your business is hard to do. You have to prepare yourself for it because it will take a toll on you. No one likes to admit a failure and that is what you are doing when you have to close. Even closing a successful business is hard. Your life changes. Lots of people I know equate themselves with their business, so shutting it down puts out some mental pressure. So be ready to deal with it. I’ve closed two businesses, one out of necessity and one because I wanted to do something else. I was lucky because I had something else to do right away and could put my energy into that. All I can say is be prepared for whatever comes.

A guy named pschmitt has posted a 4 part article about what it was like to close a business he started with his wife. I recommend reading it all just to get a feel for what it was like for him. It’s a great story.

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