If you’ve found yourself in the unfortunate position of having to close your business down, there are many things you can do to make the process smoother and easier on yourself.
Approaching this moment takes a lot of planning and preparation, much like at the beginning of your business venture.
Knowing everything you actually have to do when choosing to close down your business is the most important aspect in ensuring you get everything right.
So, by referring to the following list you can ensure that you won’t make any silly mistakes or errors that lead to further complications.
How to close down a business
Closing down a business, ending a partnership or becoming a sole trader can be intimidating experiences. But don’t worry – we are here to help guide you through the process of exiting your business in a complex but organized manner.
With our step-by-step guide, you can rest assured that all relevant paperwork and processes will be completed in a timely and accurate fashion so that you can have peace of mind about your venture as it winds down to closure.
Don’t go through this alone – trust our team to provide the necessary support and resources for a successful termination of your company.
- Collect all outstanding accounts before you decide to notify customers that you’re going out of business.
- Sell off all remaining stock that you possibly can, using a closing down sale is a good technique that can give you one final boost in sales.
- Notify your customers and deal with any remaining contractual obligations. Remember to return any deposits or payments for goods not delivered or services not rendered.
- Terminate your commercial lease. Give your landlord the required notice stated in your lease. This information will be available in the contract your landlord will have supplied to you in the past.
- Notify and pay your employees as soon as possible. You don’t want to end your business on bad terms with your past/current colleagues, so let them know your closure plans as soon as you can.
- Make sure to pay any wages that are still owed and any holiday or leave payments that remain unpaid as of yet.
- Liquidate your business assets in an orderly and legal fashion.
- Cancel your business credit cards and subscriptions as these will no longer be of use to you.
- Close your business bank account and any other accounts relating to your company that are no longer valid for use.
- File your final corporation tax returns, checking the box stating that this is your final return.
- Leave contact information with former business contacts, colleagues, and employees. This will allow them to contact you for any further information they require or to gain a reference from you, etc.
If you have a heavy debt load and creditors who won’t settle for less, bankruptcy or an IVA may be your best route if you are a sole trader. if your trading style is a limited company then liquidation or a CVA will be an option. If you do file for bankruptcy, it will be your first step in the closing process; the rest of the steps discussed above will follow, shaped by the bankruptcy process. But there are cheaper alternatives for small business owners”
Keeping your former employees on your good side is both respectful and helpful to you, especially when it comes to future projects you may decide to pursue and you need the helping hands of people you’ve come to rely on.
Harvard Business Review goes into more detail on this matter by stating, “All too often the negative impact of a closure on the surviving business is underestimated. If employees who lose their jobs are treated impersonally, unfairly, or without respect, the productivity and loyalty of their remaining colleagues will suffer. Recruiting new talent will be more difficult. And customers and suppliers that feel burned by a shutdown may retaliate against the rest of the company by diverting business to competitors”.
Closing down a small business in the UK
Closing down a small business in the UK can be a challenging and emotional process. It typically involves a range of tasks such as notifying employees, creditors, and customers, canceling contracts and leases, and settling outstanding debts and tax obligations. Depending on the circumstances, the owner may also need to liquidate assets, sell inventory, or transfer ownership of the business.
It is essential to follow the legal requirements and procedures when closing down a business, including registering for VAT deregistration, filing final accounts, and informing relevant authorities. While it can be a difficult decision to make, closing down a small business can also be an opportunity to learn and grow from the experience, to start afresh, and to pursue new opportunities.
Attempt to avoid going into administration before it’s too late
There are many things you can do in an attempt to save your business before it’s too late, but using the correct survival method for your company is essential in these types of situations.
If you’re the owner of a company that is faced with going into administration, it’s important to know that all is not necessarily lost. You have options and different routes you can take to potentially save your business, or at least soften the blow of the loss of your company. There are different methods of potential business rescue that you can pursue. Distressed business finance maybe one option, it allows a quick inject of cash into the business.
The Guardian have stated that insolvency practitioners can be a good option for businesses that are under financial threats. They say, “There was a particular increase in insolvencies in the third quarter of the year, during which 420 firms went into administration including the fashion brands Jack Wills and Karen Millen and the travel firms Late Rooms and York-based Super Break”.
The insolvency process can be a highly achievable option for business owners wishing to give their company another go, hoping to get things right for the business this time. If you’re struggling to fund your business or cover fees that are due, contacting licensed insolvency practitioners may be the best option for you.
Business Insolvency Helpline is a market leading company when it comes to the insolvency procedure. Their experienced team of experts can guide you through the best options for your personal business situations, so consider contacting them today via their website.
Evening Standard believes that in order for small businesses to survive, they must be smart and cut all extra costs immediately during the time in which many of us are choosing to to enter self isolation to protect our health. They say, “any extra cost cutting needs to be done today. Examples include; minimised travel, cancelling any non-essential subscriptions, reduce online sponsored posts, reduce or eliminate meetings to reduce expenses, pause any large costs that could be undertaken at a later stage.
The other tip they advise small businesses to take is try to use the positives that display themselves to you now, as a business owner. If you’ve been wanting to try and get your staff to work from home, then you now have the perfect opportunity to do so for example. They write, “There have been a number of conversations over the last 18 months about flexible working increasing in the UK. Although this feels hard and fast, it is an opportunity to demonstrate team work, pulling together, and testing and learning. The benefit of working from home might introduce a new way of working, for the future, and encourage your team to step up and demonstrate why they are worth investing in”
Your duties as an employer
As an employer in the UK, if you are closing down your business, you have a number of duties and responsibilities that you need to fulfill. These include:
- Inform your employees as soon as possible about the closure and the reason for it
- Inform any relevant government agencies, such as HM Revenue and Customs and the Department for Business, Energy and Industrial Strategy
- Make arrangements to pay any outstanding salaries or wages to your employees and any other outstanding obligations, such as redundancy pay
- If you are unable to pay these amounts in full, make arrangements to pay what you can and inform your employees about this
- Complete and submit all necessary paperwork, such as tax returns and final payroll reports, in a timely manner
It is important to follow these steps carefully to ensure that you meet your legal obligations as an employer and to minimise any potential disputes or legal claims that may arise.
To conclude
Closing a business is never an easy decision, but circumstances like economic downturns, pandemics, or lack of customer base can make it the most practical thing to do. Unless sold or passed on to another owner, closing down your business is initiated by filing paperwork with the necessary agencies that state you are no longer in operation. When closing, consider discontinuing all contracts and leases associated with the business and pursuing any payment plans.
Additionally, collect any accounts receivable that may be outstanding and take steps to wind down operations responsibly. While these steps seem daunting and overwhelming at first, proper documentation can make all the difference in providing closure when your business ends.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.