1 Can I Keep Inventory That Doesn't Sell When I Close My Business?
2 Exit Strategies for a Business
3 Tax Issues on Closing an S Corporation
4 Bulk Sale Agreement
The closing of a business affects owners, employees, customers and the public. Owners must unload inventory, equipment and other property, while employees hunt for new jobs and their communities plan for the increased need for unemployment assistance and new businesses to replace the closing one. Discounts from going-out-of-business sales may lure shoppers eager for bargains. These considerations drive government regulations on the closing of businesses. The rules exist to prevent deception of consumers, help displaced workers and their communities prepare to find new employment opportunities, and provide a means for businesses to settle their affairs with debtors and the government.
A going out of business sale is any offer to sell to the public or a sale to the public of goods, wares, or merchandise on the implied or direct representation that such sale is in anticipation of the termination of a business at its present location or that the sale is being held other than in the ordinary course of business. New Jersey Business Laws Businesses are regulated through a combination of federal, state, and local laws. For instance, states sometimes implement a higher minimum wage than the national standard or offer more protections for employees.
Going-Out-of-Business Sales
Retail stores who advertise 'going-out-of-business,' 'everything must go,' liquidation or similar sales must follow rules to show that they are closing their business and prevent deceiving consumers. In Texas, a store must request a permit from the chief appraiser of the county where the sale will occur and must list the merchandise offered for sale. The business may not include merchandise that it orders after the sale starts and must end the sale in 120 days. The stores may not sell at retail the merchandise left after the sale. Texas law limits a store to one going-out-of-business sale every two years.
Employment and Labor Rules
Certain small businesses must notify their employees and government agencies of a business closing. Plant closings, sales of a business and layoffs of a specified number of employees, or 'mass layoffs,' trigger the notification rules. Federal law requires 60 days' notice if the business employs at least 100 people and at least 50 are affected by the closing or layoffs. Some states have more stringent rules. In New York, employers must notify employees and the government 90 days before closing or layoffs if the action affects at least 25 full-time employees.
Dissolution
A business entity such as a corporation or partnership that is ceasing its business must dissolve. This process consists of an agreement by the shareholders of a corporation, including those with only one or a few shareholders, or partners to end its business and existence. Corporations and limited-liability companies must file 'Articles of Dissolution' to notify the public that the entity no longer exists. According to the Small Business Administration, businesses owned by partners or a single person do not need formal action to dissolve, but should still notify creditors and the government. As part of ending its affairs, the business must pay its debts before paying the owners their shares of any remaining profits or property.
Taxes
Businesses must file final tax returns with the Internal Revenue Service and their state tax agencies upon closing. The Internal Revenue Service lists the forms, which cover items such as wage withholding (W-2); unemployment taxes; a partner's share of income, deductions and tax credits; the sale of the business' remaining inventory, equipment and other property; and payments to vendors and contractors of the business (Form 1099). The Small Business Administration advises businesses to contact the Internal Revenue Service to close a Employer Identification Number (EIN) account. The Internal Revenue Service does not cancel the number, but will have notice that the business no longer will use it and will stop sending them tax bills. The business must pay any taxes due.
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About the Author
Christopher Raines enjoys sharing his knowledge of business, financial matters and the law. He earned his business administration and law degrees from the University of North Carolina at Chapel Hill. As a lawyer since August 1996, Raines has handled cases involving business, consumer and other areas of the law.
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Raines, Christopher. 'Government Rules & Regulations for Going Out of Business.' Small Business - Chron.com, http://smallbusiness.chron.com/government-rules-regulations-going-out-business-46629.html. Accessed 17 June 2019.
Raines, Christopher. (n.d.). Government Rules & Regulations for Going Out of Business. Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/government-rules-regulations-going-out-business-46629.html
Raines, Christopher. 'Government Rules & Regulations for Going Out of Business' accessed June 17, 2019. http://smallbusiness.chron.com/government-rules-regulations-going-out-business-46629.html
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