The stress and worry that can come with running a business can be draining and powerful. The very last thing that most business owners wish to contemplate is the closure of the business that they have worked so hard to nurture, grow and preserve. However, sometimes a business model fails, sometimes a market becomes saturate or human resources are hard to acquire. Whatever the reason for the failure of a business, when it comes time to close that business, as a Massachusetts business owner it is wise to consider following some procedure to do it right.
Why Bother, I just Want to Shut My Business Down
It is tempting to think that simply closing the doors of your Massachusetts business and walking away is all that is necessary to do. However, taking such action may lead to lawsuits, other claims and trouble following you. The old saying, “if you walk 10 miles into the woods, it takes 10 miles to come out….” applies here. That is, withdrawing from a business is a process if you want to reduce liability risk while separating from the business.
Business Closing Checklist for Massachusetts Companies
NOTE: This Massachusetts business closing checklist may be incomplete, or require more to be complete. Please contact attorney Gaudet so we may assess your your individual circumstances to provide a tailored solution for you.
Accounts Receivable
The first task you need to complete is to ensure that you collect all of the money that is owed or due to your business. For obvious reasons, it is imperative that this money be collected prior to business closure and prior to notification of customers of your intent to close, if possible.
Inventory Reduction
Sell, sell, sell…if possible and applicable, sell of as much inventory as possible. Selling inventory will help the business closure process by raising some funds which may be needed to payoff creditors. If inventory sales are not possible or plausible, you may wish to donate inventory. Consider the fact that donations may be tax deductible, either personally or to the corporation.
Notification of Creditors
In any business closure, it is important to reduce the amount of time that a creditor can demand payment on the debt owed them. Because of this, it is important to start the clock ticking by giving a debtor proper notification to vendors, utilities, banks, and others.
Notification of Customer
When closing your business, you will also want to notify your clients and customers of the fact that your business is closing down. If your business model works by creating contracts with clients, be sure to follow any obligations created by that contract between your business and the client. Contact our offices for a contract review for more information and to ensure your compliance with contractual obligations created by entering into a contract with a client.
Dealing with Leases
What about the commercial lease that your company has? How are you going to deal with your commercial landlord. The lease itself should have a clear method of terminating. If it is not possible to stay for the full term of the lease, it is important to understand what the Landlord will have as leverage if the Landlord demands full payment – which is likely. At a minimum, most leases will require a 30-day notice of intent to break the lease. Be sure to contact us so we can assist you in interpretation or negotiation of a commercial lease.
Dealing with Employees
It is not only kind, but best practice to notify employees of your intent to close your Massachusetts business. It is also imperative to make final paycheck payouts to employees in a timely fashion, typically on their last day of employment. Be sure to consider payouts required, that is, accumulated vacation pay and other statutorily defined obligations as applicable.
Asset Liquidation
Tally your business assets, and liquidate them. Keep in mind that any revenue raising process such as liquidation requires a large degree of care – debts owed by the business are to be paid first, in most cases, so be cautious to maintain a balanced approach to incoming funds.
Payoff Debt
While not always possible, paying of debts owed by your Massachusetts business is an important step in the business closure process. Where possible, settle those debts for less than the amount owed by the business by informing creditors of your pending closure and inability to make full payment. Attorney Gaudet may be able to assist in negotiation with creditors – contact our offices for more information. Demand a payoff receipt from each of these creditors as your bills are paid in full or settled.
Pay Federal and State Payroll Obligations
Whether you use your own external payroll company, or you do it yourself with the IRS and Massachusetts Department of Revenue, be sure to settle any amount owed to these agencies.
Cancel Business Card
Submit Sales Tax Forms and Other Funds Due
Bulk Sales Law Massachusetts
MGL Chapter 62C, section 51 governs notification of the commissioner during the sale or transfer of corporate assets and applies here – contact our offices for more information
Close Business Operating and Other Accounts
Cancel Business Permits and Licenses
File Employment Tax Returns
IRS 940 AND 941, and state withholding and wage reporting forms
File Corporate Income Tax Returns
as final return after consultation with your corporate accountant
Contact Accountant
a number of forms are required for the sale, and acquisition of assets, please fill out these forms and file after consultation with your corporate accountant
Stay Locatable
give your former business contacts a means to contact you in the future…this goes a long way to establishing your good faith
Distribute the Remainder
assets remaining may now be distributed to shareholders
Dissolve the LLC or Corporation
File the forms necessary to formally dissolve the corporation. Contact our office for assistance with this step in the process
Wrapping up the Closing Process
Closing a corporation, LLC or other Massachusetts is truly an interdisciplinary task. Your corporate lawyer, accountant and any other necessary advisor should be on board with the process so that you can best limit your liability from the various stakeholders that may have an interest in your business affairs.
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