“We saw and we emulate” is one way the Cavender family fortifies their San Antonio legacy. Keeping business momentum strong throughout the organization is key to longevity and legacy.
The decision to close or sell your business is difficult as it is — and the stressful situation is only compounded if things aren’t executed correctly. Turn to experts like your lawyer, accountant, or banker for advice on mapping out your exit strategy.
Closing Your Business
- Make the decision to close. Sole proprietors make the choice themselves, but all co-owners must come to an agreement in the case of partnership structures. Be sure to comply with your articles of organization and solidify the agreement in writing.
- File your legal dissolution documents with the state in which your LLC or corporation is registered. If you don’t, you could be subjected to ongoing taxes and filing requirements.
- Cancel all unneeded registrations, licenses, and permits (including your trade name) to keep your finances and reputation intact.
- Adhere to federal and state employment and labor laws, especially in regard to how you’ll pay your employees after closing.
- Settle any outstanding financial obligations. File your final income and sales tax returns, cancel your EIN, and alert federal and state tax agencies to the situation. The IRS also published a helpful checklist of steps to take to close a business.
- Maintain your records, including tax and employment records which may be required by law. It’s customary to maintain these business records for approximately three to seven years.
SELLING YOUR BUSINESS
If you decided to put your business up for sale, you’ll want to determine what it’s worth before presenting it to interested buyers. You can complete a business valuation on your own, or enlist the help of a professional business appraiser. Attach precise values to all property, real estate, and assets connected to your business, including intangible assets like brand presence, intellectual property, customer data, and future revenue projections. Try out the following common approaches to valuation:
- Earning value approach: Measures forecasted revenue and accounts for potential risks.
- Market value approach: Compares your business to similar ones that have sold.
- Asset-based approach: Subtracts total liabilities (stated in your balance sheet) from the total net asset value.
Whatever the reason for a change in ownership — from an unfortunate death to resignation by top leadership — there are three options available to transfer the rights of possession to another person or entity.
FILING FOR BANKRUPTCY & LIQUIDATING ASSETS
If your business is failing, it may be time to shut down and move on. Filing for bankruptcy can be expensive and time-consuming, so you’ll need to be well acquainted with all legal filing requirements and taxes. Use the IRS Bankruptcy Tax Guide as a reference on canceling debts, tax procedures, and factors specific to various business structures. When financial difficulties become too much to handle, and there’s no merger or sale solution in sight, liquidating your assets is the ultimate recourse. Make a plan with your lawyer and accountant to present to creditors and shareholders before terminating your lease, disconnecting service lines, and selling your equipment.
- Write an inventory report and determine assets for sale
- Secure your merchandise
- Determine your assets’ liquidation value with a qualified business appraiser
- Use that value to estimate total sale proceeds and revisit your decision
- Choose sale type: negotiated, consignment, internet, sealed bid, or retail
- Decide on the best time and location for your sale
- Hire an auctioneer, dealer, broker, or other expert to conduct the sale
- Use a non-recourse bill of sale so the buyer assumes the associated risk
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