If you’re an entrepreneur, you might be aware of the estimates that many businesses will close their doors within the first 12 months, and many more will shut down in the next 2 to 5 years.
It’s not easy owning and operating a company, and you can feel like dirt when you’re heading a failing business. If it were simple to construct an empire, everybody would be as wealthy as Jeff Bezos and Elon Musk. But not everybody is the head of Amazon or the face of Tesla Motors.
A lot of business owners wish they could get their hands on a second chance at running their store or consultancy firm. For most, they only had one shot. But for a select few, having another opportunity at managing the next big thing in biotech, marketing or retail should never be taken for granted.
So, what happens if you shut down a business and then reopen under a new name? What’s the process?
Within this article, we’ve compiled a detailed breakdown of the various steps you need to take and the tips you should employ when you shut down your firm and then restarting your enterprise under a different title.
How to Close an Existing Business
1. File Dissolution Documents
In nearly every jurisdiction, you will have likely registered your business.
When it’s time to close up shop, you must formally dissolve the business through your state, province or municipality’s process.
There are generally two tasks to take care of:
- Resolution of Dissolution
- Filing dissolution notice
The former consists of a formal agreement by the business owners(s) to dissolve the company. Even if it’s just you, it would still be a prudent step to possess this document. You don’t need to submit this filing with the government, but it’s still important to have some proof that you and other parties approved the dissolution.
The latter is a dissolution document that must be filed with the government responsible for these types of subjects. Every jurisdiction has a different set of standards, legal and business documents and procedures, ranging from fees to requirements.
For the most part, this is what you can anticipate for a dissolution document:
- Name of the business
- Tax identification number of the company
- The date the dissolution was authorised
- Effective date of dissolution
- Statement that the dissolution was approved by all parties involved
Every article of dissolution should include the name of the LLC, a reason for the dissolution, the person appointed to end the corporation and the signature of the authorised person.
2. Cancel Everything
Sure, you spent all this money years ago on permits and licences only to cancel them later. But that’s what happens when you shut down operations.
In order to protect your finances and reputation, it’s imperative to cancel business names, licences, permits, registrations and anything else that had been integral to get your business running and keeping the lights on.
3. Resolve Financial Obligations
Just because you have ended your organisation it doesn’t mean everything is just left to rot away. Over the next little while, you will need to take time to resolve your financial obligations.
This could consist of a wide variety of different items to check off on your to-do list:
- Submit your final income tax return and pay your sales taxes
- Notify your creditors and vendors, and arrange to pay these entities
- Close any business accounts you may have with a financial institution or warehouse
- Contact the tax authorities and other bureaucratic offices about your intentions
- End your Employer Identification Number (EIN), or something comparable in your region
This is an important step because it ensures you’re not beholden to anyone when you’re closed.
4. Initiate the Liquidation
Is it time to liquidate your assets?
This usually happens when you can’t find buyers or successors to take over the business.
Before you start selling equipment and disconnecting utilities, it would be helpful to speak with an attorney or get in touch with an accountant to help you out with creditors, if necessary.
So, what are the steps you should take to minimise the headaches of the liquidation process?
- Create an inventory of everything you own, and determine what is up for liquidation
- Book an appointment with a qualified appraiser who can calculate the value of your stuff
- Select the type of sale, such as retail, negotiated, consignment and others
- Estimate the net sale proceeds
- Utilise a non-recourse bill of sale so buyers acknowledge the associated risks
Liquidation is usually associated with bankruptcies, but it may be a great tool to return some of your investment. Also, anything that is left over should be properly allocated to yourself or other people belonging to the entity.
5. Keep Track of Your Records
We’re sorry to inform you that you must keep track of your records, mainly for tax purposes. In fact, in a lot of developed markets, you need to maintain records for anywhere from three to seven years.
Your recordkeeping should be in relation to employment, taxes, rent, utilities and capital expenditures. This may be one of the most tedious tasks of the business world – before, during and after – but it’s necessary during all stages of owning and operating an enterprise.
6. Check with Legal
Whether you have an attorney on retainer, or you need to hire a corporate lawyer to help you with the process of winding down operations, you need to comply with state/province and municipal laws.
Since employment, labour and tax laws are complex and confusing, you should always check with legal after closing so that you are in compliance with the government.
7. Leave Contact Information
Because you never know when you might need them again, leaving your contact information with multiple people and firms is recommended by a lot of business experts.
So, leaving your name, telephone number and email address with suppliers, lenders, service providers, landlords and customers is an investment for the future.
8. Collect Outstanding Accounts
An imperative step you need to take before you go out of business is to collect outstanding accounts receivable.
A helpful trick is to avoid notifying clients that you’re closing down because then they might choose to take their time or delay payments until it means nothing to you anymore.
You should always aim to collect as much as you can, no matter how little it is.
How to Reopen under a New Name
1. File Paperwork with Local Government
Since it’s not allowed to reactive dissolved businesses, especially if it was voluntarily and legally filed, you will need to go through the process of starting a new company with a new name.
Ultimately, it’s about doing the same thing you did with your first enterprise: registration, licensing, fees and others. You will need to file paperwork with the government in charge of these matters.
2. Seek Clearance from Tax Authorities
Be it a sole proprietorship or a partnership, you will need to seek, inform and attain clearance from the tax authorities.
The tax agency will monitor your information through a tax identification number, and the department will eventually grant you clearance to reopen under a new name.
If you’re unsure how to go through this process, you may need to get in touch with a firm that specialises in all things finance, accounting, taxes and anything else related to business and numbers.
3. Contact Old and New Creditors
Do you remember when we mentioned leaving your contact information with creditors, clients and other important individuals and entities? Well, here’s why!
If you maintained a positive relationship with suppliers, vendors, lenders and customers, then there is nothing wrong with getting in touch with them again. This is good idea to get things going again, especially if you had loyal clients or lenders with excellent rates, terms and conditions.
All you need to do is to inform of the business change.
4. Cure Deficiencies
Before reopening your business, legal authorities may mandate that you cure any deficiencies within your organisation in a set timeframe.
Not all companies need to go through this process, because it mostly applies only to corporations that were dissolved through legal intervention.
That said, it’s still a good idea to remedy any internal problems that occurred in your firm to ensure that the same issues do not pop up in the future and threaten the foundation of your entrepreneurial endeavours.
5. Update Your Digital Presence
Your digital presence is imperative in today’s economy.
Every digital marketer will recommend to try to be everywhere on the internet if you wish to be found. It doesn’t matter if it’s Yelp or Google. As long as you’re doing more than just building a website and tweeting, you should generate some traffic.
But as you reopen, you must update your digital footprint. So, if you have a Google listing, you need to remove the old identification and replace it with a new one. This way, consumers will be able to find you and your new store or organisation.
6. Examine Your Four Ps
Finally, the last thing you should do is assess your four Ps when you’re about to open your doors.
Just what are the four Ps?
- Product: Does your good or service match consumer demand? Can it survive market conditions?
- Price: Will consumers pay these prices? Does it connect to the real or perceived value of your products?
- Promotion: Do you have an advertising campaign? Are your new branding efforts working?
- Placement: Do you have a great location – in your store or in the public – for your products?
Since you, ultimately, want your second enterprise to be a success, it’s important to examine the four Ps and make certain that you have mastered these elements.
It makes sense for companies – home-based or a commercial office space – to shutter and reopen under a new name, especially in this type of economy.
Be it a small company or an immense corporation, if there’s an opportunity to restarting operations, why wouldn’t you at least try it? Perhaps this is the time your business will survive for as long as you want to be in business!
Everyone has that entrepreneurial spirit inside of them, but not everybody can turn that inherent gift into something practical and successful. Of course, it requires a business acumen to turn a company founded in a garage and into a multinational corporation.
At the same time, you also need to learn the valuable entrepreneurial lesson of why we fall down: so we can learn to get back up. Entrepreneurship is all about trial and error, the freedom to succeed and fail, and, most importantly, knowing what works and what doesn’t.
The world’s richest businessmen were not overnight successes. It demanded years of blood, sweat, tears, sleepless nights and 24/7 pow-wows.
If you had to witness a dissolved company in front you, it’s not the end of the world. You won’t make the same mistakes twice!
Have you ever closed and reopened a business under a new name? What advice would you give to business owners considering doing the same? Join the conversation down below and share your thoughts and experiences with us.
This article is an updated version of an earlier article originally published on 4 January 2015.