How to Plan a Business Exit

A business exit plan is as important as the business start-up plan.

Exiting a business can be a lengthy process depending on the complexity of your business structure. According to the U.S. Small Business Administration, a business exit can take "weeks to years"and is not a one-step process. A good exit plan is just as important as the plan to open the business and should be included in the original business plan. The goal of the business exit should be to maximize the profit that you will take out of the business while minimizing the amount of time it takes to exit. The better prepared you are when exiting the business, the smoother the process will go.

Instructions

1. Meet with your partners to discuss your exit. Several decisions need to be made at this meeting. Determine whether they want to close the business, buy your shares, go public, or sell the business. Agreements that are reached at this meeting need to be documented in order to avoid disputes that could arise later. Exit time lines need to be determined at this meeting. Decide on an exit team, which usually consists of an attorney, a CPA, department managers of the business, an appraiser, and the owner/partners of the business.

2. Notify employees, creditors, and customers of your intent to exit from the business, whether it is due to business closure, sale of business, or change in business structure. Keeping them informed reduces any confusion and rumors that could hinder your exit from the business.

3. 

   Maintaining an accurate inventory throughout the life of the business reduces exit inventory preparation time.

   Take an inventory of the business stock and list all assets that the business owns. An accurate inventory is vital to establish the value of the business and make decisions regarding the liquidation of assets. A complete list of all debts should also be made.

4. Ask an expert about the value of your business. Business owners tend to overestimate the true value of their business because of the sentimentality that is often associated with owning the business. An outside expert opinion will give potential buyers a true indication of the value of the business and will help you to determine a good time to exit the business when the potential profit is high.

5. 

   Notify creditors, utilities, and the IRS of your business exit time line.

   Negotiate contracts that extend past your business exit. Work with creditors, including the IRS, to finalize last payments of contracts, leases, and loan payments. Provide information regarding new business ownership, new business structure, or "going out of business" time line.

6. Liquidate assets, pay outstanding bills and prepare final financial statements for the business.

7. Prepare final paperwork for the business. According to Findlaw.com, this also includes: corporate dissolution papers, final tax returns, cancellation of registration, licenses, and permits, and bank account closure.

8. Store all records from the business exit in a safe and secure place. Records should be kept for at least seven years.

Tips & Warnings

• Cancel any licenses or permits that you hold with the county.

• Submit final sales tax forms to the state office responsible for collecting sales tax. Notify the sales tax office of the business exit and fill out appropriate forms.

• Keep some money available to pay any creditors that may have been forgotten.

• Make the final payroll taxes to the IRS. You can be held personally liable for unpaid payroll balances for your company.

References

• 5 Tips on Exit Strategies
• Plan Your Exit
• A Chronology: A Road Map to Closing Down Your Business

Resources

• Small Business Planner