One of the toughest decisions a person can make is deciding to shut their business down, but sometimes it just needs to be done. Whether you’ve decided to shut down the business because it’s not doing so well or because you have an even better idea you’d like to go for, there are a few precautions you need to take.
It can take a long time to shut down a business properly. You’ll need to have an efficient closing plan that will not only offer the most protection possible to your personal assets and credit, but will also help you keep your reputation within the community. You might even be lucky enough to close down a company with retained earnings, depending on the value of the assets and earnings available. If the assets and earnings of the company that need to be distributed amongst the shareholders are less than £25,000, then it is possible for a business to apply for a strike-off application to dissolve the company.
However, closing down legally needs to be done first. Here are some precautions to take when closing your business:
File a dissolution notice
In order to be able to dissolve your business, it needs to be legally shut down too, and that will only be possible with a dissolution notice. However, it is important to take into consideration that it won’t be possible to strike off if the company has done any of the following actions in the last three months:
- Changed the name of the company
- Performed business transactions
- Took part in any business-related activities – unless it was necessary for making an application, needed to shut down the business, or needed to be taken to comply with any legal requirement.
Notify employees
If you’re planning to shut down the company, you can’t just leave your employees stranded without a job. That’s why it is essential that you notify them within the period mentioned in their contract, whether it’s one month in advance or three months in advance. You need to provide the employees with enough time to be able to look for new jobs to avoid ruining your reputation or resulting in multiple suits against your company.
Pay off remaining debts
You need to finalize your accounts and make sure you’ve paid off all your debt to be able to close your business without harming any other companies you used to deal with. It’s always important to maintain good connections and having unpaid debt will not allow you to do that. In order to wipe the slate clean, you should make sure that everything is in order.
Liquidate your assets
Before a company is dissolved, it needs to ensure that it has liquidated any assets as well as dealt with any retained earnings before it is dissolved, otherwise, when it is closed, it will be hard to get your hands on it. Once the assets, as well as retained earnings, are put together, if the net value is more than £25,000, then it is better to file for a Members’ Voluntary Liquidation rather than a strike off. That’s because the excess assets are distributed to shareholders, making it a better gain.
Close bank accounts
Remember to close off any bank accounts as well as credit cards related to your business to avoid paying fines or finding yourself in debts you hadn’t accounted for.
Make sure your business name is canceled
Once you’ve filed the dissolution notice, you’ll also need to cancel your name and ensure that all CRA and tax accounts are closed. Otherwise, it will be as though your business still exists.
Maintain relationships
It’s essential that you also notify your customers, vendors, business associates or anyone who will be affected by the closing of your business and give them a way to contact you in the future. This will help maintain strong connections that you will find useful in the future, especially if you continue to work within the same field. Maintaining strong relationships and letting those affected hear from you personally will build a stronger connection and allow those who matter to continue to know how to reach you when needed.
Before you take the step of shutting down your business, it’s essential that you take all the necessary procedures to ensure that you protect yourself and your assets, as well as your reputation. These steps and precautions will not only help secure you legally, but will also make your reputation spotless with those who matter, allowing you to maintain useful contacts that you could continue to do business with in the future.
Run and change your cell number.
Are we posting this article as a public service for the CBD?
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