In our last article, Is it time to close my business, we mentioned that when the time comes to move on, Entrepreneurs ought to have an exit strategy, as properly...and gracefully closing things off legally and financially will improve your chances of transitioning smoothly into another venture.
No doubt, the idea of ceasing your business will be a tough and difficult one to process, but you would need to put emotions aside and close your business the right way, so as to avoid you further distress and setback.
From the moment you’ve reached the decision to close your business, there are several steps that you will need to take. You would need to follow through with the process entirely, so as to transition with ease, quickly, smoothly, and cost-effectively as possible. Also, based on your legal business structure, there are financial issues to be considered, as well as legal penalties that can result from closing your business, if the process is not done right.
Consult all decision-makers
One of the first things you would need to do if you are not a sole proprietor, would be to liaise with all those involved in the decision-making process in your organization. If you are a sole trader, and the principal decision-maker is you, then you simply start making a detailed, chronological list of all that needs to be done for you to properly close. If you have partners or investors, then you will need to pass this decision through them and allow for their input. Legislations governing Corporations, Limited Liability Companies and Partnerships, may include guidelines for business closure such as voting on the closure decision and recording the final vote in the Company’s minutes. Bear in mind, this may be a difficult conversation to take in and your team will be hurting, as their minds will be in a whirlpool of questions about their security and financial future. You will need to follow any business closure strategy or process that would have been outlined in your written agreements.
See Rights to partners in the dissolution of Partnership
Check in with your staff
It could be chaos and disastrous if staff finds out that the business is closing before you get the chance to officially tell them, so make this move a priority and let your staff know as soon as possible. They too, would be concerned about their financial future and where they would fall into any benefits schemes your company would have negotiated. Any legally registered business would need to comply with employment and labour legislations, especially with respect to layoffs. This would include making the proper employee compensations after closing (severance pay). The principles of good Industrial Relations practice, redundancy, retrenchment and severance are governed and laid out in the Trinidad and Tobago Retrenchment and Severance Benefits Act CHAPTER 88:13. The Act outlines the specific process that employers should follow as it relates to redundancy, retrenchment, and severance.
Don’t ignore your debts
Before closing your business, you should try to clear off any outstanding debts. Depending on your legal business structure, you may be required to settle any debts before distributing any monies or assets to the members. One of the reasons you may be closing might be a lack of funds, so you may want to consider liquidating some assets. If this is not an option, you should seek legal counsel from an attorney.
Don’t forget your customers and your suppliers
You most certainly should not leave these key stakeholders out of your communication. It would be wise to let those with whom you’ve developed a work/business relationship, know about the closure. Make sure you’ve cleared up any outstanding client work you may have had. To be fair to your loyal customers, let them know about your closure decision in good timing, as this will also be difficult for them, and they too will need to adjust. Consider that some of your customers may have to make alternate arrangements if they relied on your business and you were their only provider. Make contact with others you work with, for example, freelancers, sub-contractors, vendors, etc., and let them know that you are closing. Keeping the lines of communication open is important for transparency and the practice of good business ethics. This would be rewarding, as they will most likely support you if you start another business venture.
Start collecting any outstanding amounts due to your business
If it is possible to start clearing and closing off your debtors’ accounts before publicizing your closure, then it might be wise to do so. Waiting until after you have announced that your business is closing, might prove difficult for collections as clients may find all kinds of excuses to not pay off their debts. You might want to try some strategies to encourage prompt payment, for example, discounts, without giving too much, or any information away, of your decision to close the business.
Fix and store your records
Even as you are closing the doors of your business, it is well recommended that your books be kept in order and stored safely for at least four to six years after closure. You should keep all important documentation, such as tax records, employment information, liability accounts, etc. Depending again on your legal structure, you may have to keep some records of incorporation permanently.
Cancel subscriptions
Be sure to notify any billing companies your business is connected to, for example, electricity, telephone, etc. and any other business-related subscriptions. If you were renting property, look into your rental agreement and make sure you give your landlord the stipulated time frame notice so as to not incur additional rental fees as you prepare to close.
Close off business bank accounts
You should contact your financial institutions and notify them of your business closure so as not to incur bank charges even after you've closed your business. You may also want to cancel any business credit cards.
Notice of cessation to The Registrar General (Trinidad and Tobago)
An important step in the closure of a business in Trinidad and Tobago that is often overlooked by many micro and small businesses, is the requirement to give notice in writing to The Registrar General within the stipulated time frame.
In the case of a Firm, this notice must be signed by the persons who were partners of the Firm at the time when it ceased to carry on business or, in the case of an individual, by the individual, except in the case of the death of the individual, when it must be signed by the personal representative of the deceased, and must, in either case, be delivered to The Registrar General within three calendar months after the business has ceased to be carried on.
Failure to give the required notice within the time above specified entails liability on conviction to a fine.
Based on your business structure and operations, you will also have to cancel any licenses, registrations, and permits so as to avoid various taxes and penalties that will be incurred if these organizations believe that you are still in business.
Inform the BIR
This is yet another overlooked step by MSMEs. We told you before, that closing your business isn’t just a matter of shutting down business activities. Many individuals think that just because their business isn’t generating any revenue, they don’t need to file or that they’re automatically off the hook when it comes to tax matters. Feel free to connect with us at The Timely Entrepreneur Resource and Research Centre to discuss your Tax Obligations as it relates to your business structure.
For businesses completing the cessation process, you will need to notify the tax authorities of your business closure. Failure to do this within the stipulated time can result in hefty fines as their record will show later on that you have been non-compliant in filing and you will be charged penalties and late fees.
For companies that are VAT registered, de-registration is also important when you close your business. See the application process for deregistration here http://www.ird.gov.tt/application-for-vat-de-registration.
If you are an employer and cease to be in business, then take note of the legal requirements as outlined by The National Insurance Board TT https://nibtt.net/Registration_09/registration(5).html
While closing your business might be the only option for you at this time, be hopeful that you will be on your Entrepreneurial journey soon again. To ensure a smooth transition, start your dissolution process the right way. Be well informed as to the legal requirements as it relates to your particular business structure. Use the considerations listed above as a guide to properly closing your business. If you have further questions or need more information, you can email us at This email address is being protected from spambots. You need JavaScript enabled to view it. or schedule a free 30min discovery session with us here: https://calendly.com/thetimelyentrepreneur/discovery-sessions?month=2021-04
Disclaimer: Please be advised that the information provided in this article is not legal advice and is merely an account of what you should consider when closing your business. Based on your business structure, you may have more detailed steps to consider before closing your venture. If you need legal counsel, we would be happy to connect you to one of several business attorneys in our team.
