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Plan for the closing of a business in financial crisis

Coming to the realization that your business isn't going to remain open is something that is difficult to deal with. When you realize this, it is time to take stock of what is going on and take steps to protect your own finances.

One thing that you have to do is to ensure that you keep the company's taxes paid. The last thing that you need when you are already under stress because of the business closing is to have to deal with the Internal Revenue Service (IRS) trying to come to you to collect the business' taxes. Even if you can't pay any other bills make sure that the taxes are paid.

Make sure that you aren't mixing your money with the company's money. If you do mix your money with the business' money, there is a chance that you will end up liable for bills for the company that you wouldn't have if you had kept everything separate.

You should be fully honest about the business' financial status. This is especially important if you are going to try to get loans to keep the business afloat or to try to get everything paid for the business. This honesty also extends to filing for bankruptcy if you are planning on filing for the business.

Speaking of bankruptcy, you need to make sure that you aren't making preferential payments to creditors if you plan to file bankruptcy. The bankruptcy court can go back for one year to determine if any of these payments were made. Some payments, including pensions, payroll, utilities and rent, don't qualify as preferential payments so you can pay these without worry.

The end of a business is a sad time for many business owners. By taking steps to protect yourself and your financial future, you might be set up to try future endeavors.

Source: FindLaw, "Managing a Business in Financial Distress Prior to Closing," accessed July 06, 2017

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