Shutting down a retail store is a lot tougher than closing a home office or a website. You have to get out of your lease, unless you close on the day it expires. You also have to dispose of all your unwanted inventory. And you have to settle up with employees and the various tax authorities.
Breaking the Lease
The best time to get out of your lease is before you sign it. If you've included a provision allowing for an early exit -- if your store doesn't hit your income goals, for example -- exercising the clause gets you off the hook for more rent. If you don't have legal grounds for ending the lease, you're stuck paying rent until a new tenant comes along. In a good rental market, the landlord may be willing to let you out of the lease. He may be more amenable if you throw in a cash payment.
The Inventory Issue
There are lots of ways to dispose of inventory, starting with the classic "going out of business sale." If that doesn't do the trick, contact a surplus dealer. These firms specialize in handling unwanted inventory. You may only get pennies on the dollar, but it frees you up to tackle your other closing tasks. Another option is to give the inventory to charity. However, only corporations or sole proprietors can deduct a charitable donation as a business expense.
Your sales staff and other employees all impose added responsibilities when you shut your doors. In some states, the law requires you notify your staff a couple of months in advance. As long employees keep working, you have to keep paying them, and do so promptly. Most states require you pay the final paycheck the last day of work or a few days afterward. Some states also require you pay any accrued vacation or sick leave at the same time.
Paying Your Taxes
You can't walk away from the business if you don't pay your tax debts. Along with paying your employees, you also have to pay every last bit of payroll taxes that the government is entitled to. Even if you incorporate to protect yourself from business debt, the Internal Revenue Serice can seize your personal property for unpaid taxes. You also have to pay the state any sales tax still owed when you close.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.