There may be a number of reasons why closing a business can be the right option. In some cases, owners may be seeking to retire. Other times, continued production may not be financially viable. Whatever the reason, if the time has come to close down your business, creating a detailed plan can help you to protect your financial assets, credit, and business relationships. While the legal processes and paperwork can take months to formally complete, creating a roadmap early on can help you to stay legally compliant while ensuring no steps are overlooked. Below, our blog outlines five steps to consider when dissolving a business.
- Consult with business partners: If you are a sole proprietor then the decision to close rests solely on your shoulders. However, if you have business partners, you will need to follow the terms of dissolutions set out by your business contracts and articles. Deviation from the agreed upon rules can lead to legal disputes down the road. If you do not have terms outlining this situation, you must still inform your partners of your intent.
- Inform the state: You must file all appropriate documents with the state declaring your intent to dissolve your business. While there are some instances, such as certain cases of a sole proprietorship, where this may not be needed, if you filed with the state upon the creation of your business, you must do so upon its close. Until you file, you will continue to be held liable for the debts and taxes your company incurs.
- Notify employees: Make plans to see that all employees receive their last paychecks as dictated by federal labor codes. Be sure to make considerations for employees who you may want to stay longer as well as payment for any accrued employee leave. Providing employees with sufficient notice can be good business practice. While you may not need to inform all parties immediately, labor laws dictate that workers are given adequate notice.
- Creditor notification: In addition to the government and employees, you will need to inform your creditors about your decisions to end all business dealings. Creditors will typically seek to settle outstanding claims with you and your business. The time at which you notify creditors can also influence how long they may be able to collect on a current debt or file a lawsuit.
- Collect on accounts receivable: You do not have to immediately notify all parties of your plans to dissolve a business, in fact doing so may create difficulties in collecting on any owed payments. This may not apply to certain clients or in the case of employees, however providing some notice may prevent damaged relationships which can be especially important if you are planning a new venture. Keep in mind strategies for the payment of debt when collecting funds and liquidating assets.
New York Business Dissolution Attorneys
Dissolving a business can be a tremendously complex process and if you are considering closing your company, contact Nisar & Mason, P.C. Our New York business law attorneys can help you in all aspects of your case from an initial proposal to handling creditor claims and contract disputes. While the average business owner may have a minimal familiarity with the process of dissolution, our attorneys possess more than 2 decades of combined legal experience. When you need knowledgeable advisors and powerful representation, do not hesitate to contact our firm today.
Request a case evaluation and speak to an attorney about your business today.