Starting a business takes a lot of time, and so does closing one.
We wish it were as easy as turning off the lights and notifying the post office to stop delivering mail but closing a business in Florida requires several steps to protect yourself legally.
We are happy to help. To wind down a business, you need to notify certain stakeholders that the business will cease to exist, which protects you from future lawsuits or incurred costs.
The steps you take are generally the same whether you are running a large business with 100 employees or are a sole proprietor working out of a home office.
As experienced Florida business law attorneys, we have written this article on how to close a business in Florida to give you a general idea of the work involved.
1. Vote to Wind Down, if Necessary
If you run a corporation, then your shareholders will need to vote to formally wind down the business. They also need to do this at a formal shareholder meeting.
Avoid sending out an email or a form letter asking people to let you know if they want to wind down. Hold an official meeting and keep records of the vote.
Don’t skip this step. If you do, you could end up financially and legally liable to customers, employers, the IRS, and other government agencies. For example, a customer could allege that your business was really a sham since you don’t follow required formalities to shut it down.
That could put you on the hook financially for business contracts and other debts.
If you run a sole proprietorship, you don’t need to vote. But you still should carefully document the date that you have decided to stop operating your business.
2. Notify Employees
If you don’t have employees, you can skip this step. However, if you have hired full- or part-time employees, you must do the following:
- Give them clear notice of when their employment terminates. By shutting the business you are, in effect, laying someone off.
- Coordinate to pay the final paycheck in a timely manner. Florida has deadlines you need to follow.
- Make sure to compensate employees for unused vacation time.
- Deal with retirement accounts. Contact the investment company for more information.
A key consideration is timing. As soon as you tell an employee you are closing the business, they might immediately jump to a different job. You might need only a skeletal crew working for you as you wind down.
3. Pay Your Creditors
A business that is winding down still needs to pay its creditors back. This means you can’t sell your business or its assets and then skip town with the proceeds.
Instead, go through your contracts, both short-term and long-term. Identify how much money you need to pay off your debts and make sure you set an adequate amount aside. If the contract gives you a right to early termination, make sure that you exercise that option.
What happens if you don’t have enough money to pay all creditors? Realize that they can come after you if you made a personal guarantee on a loan. (This happens more frequently than you probably imagine.) Talk with a business attorney for more information. You might need to file for bankruptcy to wipe out the debts.
4. Pay Your Taxes
Notify the IRS and the Florida Department of Revenue that you are closing your business. If you don’t, they might assume you are hiding business income and they could open an investigation.
You also need to make all necessary payroll and other contributions, exactly as you did before the winding down process. If you don’t have the money, then a business bankruptcy might be your only option for handling unpaid tax debt.
5. Close Your Bank Accounts
Once all checks and transfers have cleared, you should close your accounts. Don’t close too early or checks will bounce. If you have cash in the account after paying off all debts, you will then distribute it to any shareholders.
6. Notify the State You Are Winding Down
The state needs to know that the business has closed. This protects you by preventing someone from fraudulently assuming your business identity and doing business with unwary creditors. Fill out the necessary paperwork and keep a copy for your records.
7. Hang onto Business Records
Many of our clients have successfully wound down a business only to have an issue crop up years down the road. Maybe the IRS claims they are owed money, or a creditor sues for additional payment. For these reasons, you must keep all your business records, in order, in a safe place.
8. Speak to a Business Lawyer Today
Closing a business in Florida isn’t easy, and it is rife with pitfalls. If you have a question, our Florida business lawyers can answer. Brewer Long has helped many business’ owners wind down, and we can help you too. Contact us today for a free, introductory phone call, 407-660-2964.