Do you need to shut down your company? It happens. It’s a reality. Some businesses work and others don’t. Sometimes you burn out and can’t operate it anymore. Sometimes your interests have changed and you’d rather move on. It’s okay. It’s not the end of the world and you’ll walk away having learned a lot about what you would do differently next time if you decide to try something else. A successful entrepreneur in Atlanta and owner of Atlanta Tech Village, David Cummings, did a post about knowing when it’s time to shut down your startup. Take a read.
Once you’ve made the decision to shut down your company, here’s the problem we see quite often: Founders just stop operating the business without legally dissolving it. It’s like they just walk away, literally. But, you see, it’s not that simple. It took a lot of effort to get the company started and it’s not as simple as walking away when you’re over it. It just doesn’t work that way and rarely does anything, particularly involving legal entities.
What Does “Shutting it Down” Mean
This means that you dissolve the business. This means that you go through the process of terminating the business as required by your state of jurisdiction. It’s called a voluntary dissolution when you decide to dissolve your own business. However, if for some reason you fail to comply with obligations of the business entity statute, the state administrator overseeing business entities can take away your rights, powers, and authority over the business. This is called administrative dissolution. You want to avoid that. Many times this happens because business owners never officially shut down the business and disregard paying the associated fees, taxes, and completing required administrative tasks for operating a business in their state.
We’ve Voted and It’s Done
So now it’s time to decide if you have anything salvageable that can be sold. You want to recoup as much money as possible from your investment. You can start by composing a list of customers, competitors, and even suppliers who may be interested in your assets. When speaking of assets, this includes more than tangible items like computers and office furniture. Take some time to consider all of the value you’ve created from your business and how it can still be useful.
If It Has Value, Sell It
Do you have any intellectual property or patents? Do you have software that can be licensed to a competitor or strategic partner? Would a competitor be interested in buying your customer accounts? Have you collected meaningful data about your customer segment, industry trends, or market behavior while operating your business? You see, all of these are valuable assets that can be sold and are quite often overlooked when dissolving a business. If there is value, sell it and allow someone else to benefit from the value you’ve created. All is not lost when you shut down your company.
6 Steps to Dissolve Your Company
Once the business owners/managers/members have voted to dissolve to company, there are next steps you’ll want to complete (not necessarily in this order—many tasks can/should be done simultaneously). We’ll limit this post to what must be done in the State of Georgia to officially dissolve an LLC.
1.) Sell assets and pay all debts (or make arrangements to pay all debts) and other obligations associated with the business.
2.) Send legal notices to any entity with a potential interest in the company.
3.) File a Certificate of Termination with the Secretary of State (it’s free to do). For Georgia, this can be done online ((http://sos.ga.gov/corporation
4.) Close all bank accounts related to the company (reflect dissolution in your bookkeeping and accounting records).
5.) Terminate (or sell) the domain. Although, we suggest you consider redirecting the traffic for a while so that you can keep visitors informed of the closure and how to contact you in the event of customer service requests. IMPORTANT NOTE: Your domain is an asset that your competitors may want to buy from you so that they can capture your customers.
6.) Do a Google search and delete all accounts associated with the business (i.e. social media, etc.)
Do It Right and Hire Professionals
None of the information provided in this post is meant to provide legal counsel or replace competent legal counsel. We are not legal professionals or attorneys. The information we provide is based upon our experience in this situation. Business owners are encouraged to obtain professional legal, tax, and business advice to assure goals and intentions are met, requirements of the law are satisfied, and members of the organization are protected even after termination of the entity.
It’s Not Over
We cannot express strongly enough that you should put just as much energy and attention into properly closing the business as starting it. Don’t worry, chances are you’ll start another business. If you’ve done it before, you’ll do it again–that’s how people get the title “Serial Entrepreneur.”
Want to brainstorm on your next business idea? We recommend starting by completing the business model canvas. Here’s a link to the free one provided by TPM Focus.
Get help in the beginning. Don’t wait. Contact us now.