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Steps you need to take when winding down your business

On Behalf of | Mar 5, 2024 | Business & Commercial Litigation

It’s a sad reality that nearly half of all businesses end up closing shop within five years. But changed market conditions, increased expenses, and even partnership disputes can lead even seemingly strong businesses to the brink of failure.

If your business is on the verge of dissolution, then you should start preparing for the process ahead. It’s certainly not a fun one, but it’s necessary if you want to protect your interests as fully as possible. If you mishandle the dissolution of your business, then you could end up incurring otherwise avoidable taxes and debts, and you could lose income and assets. So, let’s take a closer look at what you can do to better ensure that your business dissolution goes as smoothly as possible.

Tips for successfully dissolving your business

The specific steps you take to dissolve your business are going to depend, in part, on the type of business you have. If your business is a partnership, then you’ll want to follow the terms of your partnership agreement. If you have a sole proprietorship, then you can skip a lot of the formalities. As you navigate your business’s dissolution, be sure to take the following actions:

  • Cancel your state tax account: When you created your business, you filled out a form to create a Florida tax account. Now that your business is ending, you’ll want to cancel this account. You can easily do so online.
  • Pay taxes owed: Before you can officially close your business, you need to pay your outstanding tax obligations. This includes payroll and sales taxes at both the state and federal levels. If your tax debt is too much to pay off in a lump sum payment, then you should contact the IRS to see if you can get set up with a payment plan that eases the burden.
  • Pay outstanding debts: Your business might have significant debt. You probably owe your employees wages, and you might have credit card debt and lease expenses that have gone unpaid. If this is the case, you need to pay them off before finalizing your business’s closure. Otherwise, you could become personally liable for those debts. And if you’re unable to pay those debts in your individual capacity, then you could end up facing several lawsuits.
  • Collect debts owed: You don’t want to miss out on any debts that are owed to your business. If you close your business too quickly, then you might be unable to collect those debts altogether. So, be diligent in collecting the debts that are owed to you.
  • Divvy up assets: Once you’ve settled all your financial issues, you and your partners or co-owners will need to split up any remaining assets. Hopefully you have a partnership agreement or operating agreement that specifies how those assets are to be divided. If not, then you’ll have to negotiate how you’ll handle the division of those assets.

Competently and confidently navigate your business dissolution

These are just a few of the matters that you’ll have to address when you want to wind down and dissolve your business. Be thorough and diligent here so that you don’t make any costly mistakes that leave you at a disadvantage moving forward. That can be hard to do, of course, when you’re dealing with the daily impact of your business’s decline, but that’s why you might want to find some support as you navigate the process. By doing so, you’ll hopefully be able to wrap everything up in a way that protects your future and puts you on course to start the next chapter of your life.