Here’s a topic most business people don’t think about: How do I go about getting out of the business I own if circumstances are such that it becomes necessary? The reasons can be as varied as the people who own trucking companies.
Walking away is never a good option, and running away is guaranteed to have a bunch of folks willing to chase you down. Planning is everything in a small business, and the same holds true if it becomes necessary to close the business.
But every company, regardless of size, should have exit strategies designed for multiple scenarios. The question is, how do you close down a business with the least financial impact on you and your family?
Here’s a checklist to follow when closing your business:
- Reach an agreement and obtain authorization from other partners and stockholders to close your business if you have a partnership, corporation or LLC. This agreement and authorization to dissolve the business should have been established under some acceptable governing set of rules, such as the original bylaws or partnership agreement.
- Form a committee to close the business if there is more than one owner. You need a person covering finance, accounting (accounts payable, accounts receivable, and business taxes), human resources and legal issues.
- Hire experts to fill the gaps in your closing committee. For many carriers and owner-operators, this could be your accountant, attorney, banker, equipment valuation expert, or even an auctioneer.
- Review your current business obligations and those of vendors or customers who have obligations to your company. From this review, make a list of problems that need to be resolved.
- Inventory what’s owned by the company, what’s owed on these assets, and how best to dispose of them with the least negative financial impact. The inventory is used to establish the value of the business and becomes the basis for tax calculations and tax returns. This will help when making decisions and managing the sale/disposal of assets. Make copies for everyone involved.
- Determine your carrier’s current worth. It’s difficult to make decisions without knowing the value of the business and its assets. Customer lists and information can be valuable to a competitor and can be cash in your pocket.
- Develop a step-by-step schedule for each area to be discontinued. This is a way to measure progress and estimate both the time to complete important tasks and when the closure will be final.
- Notify customers, vendors, creditors, independent contractors (lease operators), and employees of the closure. This may require legal notice and in some cases can be done by placing a classified ad in a local paper or by sending individual letters to each party. Consult an attorney to ensure this is done correctly.
- Check your business closing plan not once, but twice. Events happen very quickly and it’s easy to lose control. Done correctly, your net worth can be preserved; done haphazardly, your money can be drained very quickly, reducing the net value of what’s left.
- lose or transfer contracts, leases, and agreements. This may require approval from contracting parties and involve negotiation of final terms. If you lease office space, is it transferable? Can you sublet? What about any equipment leases? Know your post-shutdown obligations and responsibilities. Also, the timing of stop coverage dates for your business insurance is very important so you don’t expose yourself to risks that otherwise would have been covered.
- Communicate and be honest. We’ve seen a badly planned trucking company shutdown that left employees, contractors and vendors holding the proverbial bag. One extremely important reason for a business closing plan is to avoid putting employees, contractors, vendors or yourself at odds with each other, creating the need for litigation to resolve issues.
- Dispose and transfer assets according to your plan once your operations have been shut down. This will reduce your tax responsibility if done correctly. Most insurance coverage can be reduced or eliminated at this point as well.
- Satisfy and pay all remaining accounts payable and debt obligations from the proceeds you receive through the sale and transfer of assets and with capital in the company’s bank account.
- Prepare financial statements and balance sheets required to file the final business tax returns. Financial statements and balance sheets determine the taxes owed for the business and capital gains or losses on asset sales for the company, its principals, and stockholders.
- File articles of dissolution if required by your state. This formal filing is required to terminate the legal and tax status of the business. You may file certificates of withdrawal and/or cancelation certificates. The process also results in a review of tax liabilities and issuance of a tax clearance notice or certificate. Consult an attorney or CPA to ensure this is done correctly.
- Prepare and issue special filings, notices, informational returns, and taxes as required by the type of business entity under which your company was organized. The best way to be sure you don’t miss anything is to look back at the licenses, bonds, and permits required at the company startup. Generally, some action is required regarding every federal and state registration, tax, and licensing agency which you contacted in order to start the business. Final filing of payroll and unemployment taxes, workers’ compensation insurance certificates, required liability insurance, and other business tax returns must indicate the business is now closed.
- Close bank accounts by distributing the remaining funds according to the agreement reached by all principals, partners, and stockholders.
- File and store all business records and copies of files in a safe, accessible location. These records should be kept for at least seven years.
Closing a trucking business is equally as involved as the process of starting one. Doing it correctly not only saves time and money, but it can help you avoid a legal fight in the future.