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SELLING OR CLOSING THE BUSINESS


The decision to close or sell a business can be a difficult one to make. You may have built up a very profitable business and be reluctant to pass it on to anyone. However, even if your business is not currently very profitable, you could still find hidden or potential value that will be attractive to potential investors.
The decision to sell a business is usually prompted by a combination of factors in three broad areas - market conditions, financial pressures and life changes. However, sometimes closing down is the only option. It can be forced by a change in regulations, an unforeseen series of events, market forces or a hostile legal action.

Who you need to tell if you're selling your business

Your tax and any official records concerning your business will need to be up to date and complete when you sell your company. You should also inform all your customers and suppliers so they have the chance to raise any outstanding payments, credits and liabilities, and you can account for them when you finalise your accounts and tax affairs.
The buyer's solicitors and accountants will have to carry out due diligence checks, which involves gathering information about all aspects of a business so that the buyer can make an informed decision, and modify the terms of the sale if necessary. Among other things, they will want to see profit and loss statements, tax returns, any relevant leases and outstanding loans, with repayment schedules. If you are selling a company and there will be changes to its secretary or directors, you must inform your Companies House.

Closing down a business

When you close your business, you will need to inform various people and organisations of your decision, and tell them the timescales involved. Depending on the size and nature of the business, and your status - eg sole trader, limited company, partnership - this could involve quite a lot of planning and organisation.
If your business is a company or limited liability partnership, you'll need to inform Companies House that you are closing it down.
If you have employees, you have obligations to safeguard their rights, finalise their pay and deductions and other dues. You may also be able to offer them help in coping with the challenges arising from losing their job. Also you can consider making an employee redundant.
You may also have creditors, with a claim on any assets remaining in the business, and suppliers who need to be informed of your intentions. You will also need to inform your existing customers of the closure, collecting any outstanding payments due from them so you can finalise your accounts for tax purposes.

Preparing to close down a business

Closing down a business can be a difficult time but careful planning can help. Just as it helps to have a business plan when you are starting out, a formal written plan can prove invaluable as you bring your business to a close.
It may be useful to refer back to your original business plan to help make sure you include all aspects of your business in your closedown plan. You may even have specified procedures to follow for winding up the business in your formation documents.
Your plan should ideally list everything you need to do under headings, such as tax requirements, rentals and leases, and closing accounts with suppliers and customers. Set a specific date or timescale for each task.
Larger companies may have the financial expertise required during the closing down process among their workforce. However, you will almost certainly need to call on outside specialist professional advisers such as your solicitor, accountant, and financial adviser. If there are assets to dispose of, you may need to use an estate agent, valuer, surveyor or auctioneer.
Closing a business can be particularly stressful if there is more than one stakeholder involved. If you do find that disputes arise, outside parties can bring an objective viewpoint and help you to reach an amicable settlement.

Employer's responsibilities when closing down a business

If you have employees, you must safeguard their rights, finalise their pay and deductions, and other dues
The position of an employee with regards to rights to redundancy pay, company pension payments, etc, will vary according to the circumstances of the business closure (eg insolvency, voluntary liquidation), the business type (eg partnership, limited company, sole trader) and the length of the employee's employment to date.

The cost of closing down

There will be certain essential costs involved in the process of closing down your business.
The cost of administration, postage and telephone charges to notify the relevant authorities - eg Companies House, Inland Revenue, suppliers and customers should all be included in your preparation of the final accounts of the business. You should also take into account the cost of professional services from solicitors, accountants, estate agents, etc.
You should check the terms of your lease or business mortgage in case there are early redemption penalties to consider. If so, it is a good idea to see if you can negotiate an agreeable settlement figure, even if a specific amount is detailed in the contract.
Many of these costs may be allowable expenses, which can be offset against your tax bill. Your accountant will be able to tell you whether you can do this in each case.

Insolvency and bankruptcy

Bankruptcy applies to individuals, and is one route you can take if you are a sole trader or partner in a partnership and have debts you cannot pay. It frees you from your debts, but your assets are divided among your creditors and restrictions may be placed on your future business activities by a Bankruptcy Restrictions Order issued by a court. A Bankruptcy Restrictions Order - which is issued by the court if the conduct of a bankrupt is considered to have been dishonest or blameworthy - can last between two years and 15 years.
A company may be forced to close by being taken to court by its creditors, lenders, shareholders, or by the government or legal authorities seeking to wind up the business.
Alternatively, the owners or directors of the business may decide not to continue operating the business and apply to have the business wound up.
The court may rule that the company is passed into the hands of the Official Receiver. The receiver runs the company in the best interests of creditors and shareholders until its "liquidation" - ie the sale of the company's assets. Any money raised is used to pay off the company's debts.
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