Selling a business is not the end of your stewardship or work. All of the connections your business had with the outside world need to be cleanly severed. In this article, we'll explore strategies for a smooth closure.
1. Preparation is Key
Before you turn over your business to the buyer, detailed preparation is essential. This step of closing your business involves several critical components:
a. Cash Reserve: Maintain sufficient cash to pay expenses that will continue to arise, even after closing day when income ceases.
b. Financial Documents: Ensure you have all documents that may be needed after sale of your business. These include Tax Returns, contracts/agreements which will not be assumed by the buyer, or bills for which you retain responsibility,
c. Login Information: Collect Usernames, ID's and passwords for any accounts not transferred to the new owner.
2. First Steps after Closing
Immediately after the sale closes, some actions need to take place rather quickly. Consider these steps:
a. Employees: Determine what employees will continue to work for the "old" company to wrap up business and which employees will not. Some employees may begin to work for the buyer. "Terminate" employees as needed.
b. Facilities/Equipment: Understand which locations and equipment have been sold to or will be used by the buyer. Ensure correct folks have access to each.
c. Data Security: Change passwords on bank, credit card, and other accounts to which former employees had access if their access is no longer appropriate.
3. Within the Next 6 Months of Selling Your Business
Your business operations may have stopped but your obligations may not all be satisfied. Items to resolve in this phase include:
a. Income Taxes: File final returns after all expenses have been accrued.
b. Employment Taxes: Finalize payroll and file final returns related to employees.
c. Accounts Payable: Pay any expenses and close accounts.
4. Final Actions to Dissolve Business
Depending on your business structure and sale transaction, you may need to dissolve the corporation, partnership or association. Some issues to consider in this section include:
a. Taxes: Your state may require a Tax Clearance Certificate to confirm that all tax obligations have been satisfied.
b. Dissolution: State forms dissolving your business structure and cancelling fictitious name may be required.
c. Close Business Account: If the EIN is no longer needed it can be closed with the IRS.
5. Work Toward a Smooth Transition
A smooth transition is vital to ensure the business continues to thrive after the sale. Consider these transition strategies:
a. Stay Involved: Depending on the terms of the sale, you may need to stay involved for a certain period to help with the transition.
b. Employee Communication: Communicate openly with your employees about the change in ownership.
c. Customer and Supplier Relations: Maintain strong relationships with customers and suppliers to ensure business continuity.
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