It’s certainly a big decision to close down a business or corporation, and it’s one that should be done the right way. When setting up your business, some steps are required of you and the same applies during dissolution.
How do you dissolve an LLC? For some dissolving, the company will mean they want to completely shut down operations permanently. However, for some, they prefer the option of selling.
If you want to know the process involved, here’s a concise step-by-step guide in dissolving an LLC.
When Do You Know It’s Time To Close or Sell?
If your company has been running at a loss or can barely stay afloat, you need to close down. The purpose of setting up a business is to make a profit, but when this fails, your company can end up costing you more and running you to debt, especially during tough economic situations. Many people are reluctant to take this decision especially when they think of how they started the business from scratch. The effort and the time they also put into it, but the decision needs to be made.
Other reasons why most companies fold up are because of the following:
- Poor business management.
- Insufficient sales due to failed marketing strategies.
- A decline in productivity and returns.
- Insufficient capital and low profit.
- Exorbitant expenses and budget.
Guide In Dissolving An LLC
Take a Vote
If it was a one-man business, it would be easier to take this step without consulting anybody. However, in the case of LLC, there are more parties involved. Stakeholders have a say and there would be a need to vote on matters relating to the dissolution of the company. The voting process should be well documented, with the decision written in an agreement.
Create an Exit Strategy
You should have an exit strategy to protect yourself and also to ensure you get as much of your money out of the business. You could exit by liquidating. Here you choose to settle outstanding debts and then divide the balance among all shareholders. You can also declare bankruptcy and allow the court to sell your business assets while paying off creditors.
Inform Your Employees and all Stakeholders
Your employees should be aware of what is going on. Some legislation requires that employees get up to 60 days before the closing date. You will also need to issue their last paycheck. You also need to let your customers and creditors be aware of the closure.
Liquidate Your Assets
Take an inventory of all your company’s assets, including intangible assets like licenses, permits, patents, etc. Prepare to sell all of them and give some to charity.
Resolve Financial Liabilities
You will need to file a final tax return and employees payroll tax. You also need to back all to settle your creditors using money generated from the sales.
Close down your business
After taking all of these steps, you can then move to close operations. You should remember to cancel all licenses and permits made during the registration of the business.
