When a small business closes its doors, there are several processes owners should ensure they follow to wind up operations. For some, there will be few formalities and little paperwork. Others have legal obligations under state and federal law. In either case, the following basic steps provide a framework for any business owner looking to move on.
Notifying the secretary of state
In some cases, owners of a closely held business can lay out their own dissolution process in their operating agreement. Sole proprietorships and general partnerships can close shop without any formal announcement of dissolution.
However, that is not always the case. Minnesota LLCs, for example, must follow the voluntary dissolution rules from the state’s LLC Act. Members of the LLC must call a meeting specifically to take a vote on dissolution. Then, the business must file dissolution documents with the state.
Any small or closely held business must also formally cancel permits and licenses relating to the company. Also, it is essential to cancel any business or trade name registrations to limit liability and/or tax obligations.
Wrapping up with employees
Under the Worker Adjustment and Retraining Notification Act, companies with more than 100 employees must notify their staff at least 60 days before dissolving the business. Business owners should also plan to issue final paychecks and to pay out unused time off, if required by their internal policies.
Covering all the bases
Whether someone wishes to close their business as the result of financial challenges or from a desire to move on to bigger and better things, dissolution is no time to skip the details. A business formation and dissolution attorney can help ensure all loose ends are tied up.