Business Law – Shutting Down Your Business
SHUTTING DOWN YOUR BUSINESS
In this first blog post about Shutting down your business I will talk about legal considerations when closing your business. In my second blog post I will talk about the emotional roller coaster that many business owners face when deciding to close shop.
As a litigation lawyer and a business lawyer I meet many folks looking to start a new business. It’s always great as the lawyer to be there side by side an provide guidance and advice to a new business client.
Unfortunately, the downside is when a business owner has to decide that it’s time to pack it in. This is a very difficult decision and one that can have many financial consequences. For some, these consequences can have a lasting economic impact.
If you are thinking of closing your business there are some common issues to consider:
- Commercial lease;
- Business loan;
- Equipment;
- Employees;
- Current existing agreements with clients;
- Bank accounts; and
- Income tax.
COMMERCIAL LEASE
Is your business currently locked into a commercial lease? What is the length of the lease? What is the penalty if you break the agreement? If you are already in default of your commercial lease and owe money ensure you have a good working relationship with your landlord.
Otherwise, don’t be surprised to find a lock on the front door of your business with a notice barring you from entering. Also, even if you manage to escape somehow, you might find a lawsuit from your landlord waiting for you.
BUSINESS LOAN
I have seen way too many business owners make the difficult decision of shutting down only to find they owe money to the bank. In many of these situations the bank will not be sympathetic and will very likely initiate legal proceedings quickly. This type of litigation typically does not go well for the borrower. There is also very little in terms of a defence.
EQUIPMENT
Do you own the equipment being used? Are you renting it? Finally, keep in mind if you haven’t paid your rent your landlord might decide to, lock you out. Under those circumstances sometimes the landlord might also decide to unilaterally sell your equipment to make up for the loss.
EMPLOYEES
Having employees can be very tricky for a business looking to shut down. An employer must ensure that there has been compliance with any Ontario law when it comes to severance pay, notice pay etc. Failure to do so, could result in an employee bringing an application to an employment related tribunal or worse, a lawsuit for wrongful dismissal.
CURRENT EXISTING AGREEMENTS WITH CLIENTS
If you have existing agreements with client’s you must be cautious in how you treat those relationships. If you were contracted to perform services or provide products and you fail to do so, you could be in breach of contract. This could provoke litigation.
BANK ACCOUNTS
If your business has bank accounts what steps will you be taking to close those accounts?
INCOME TAX
Are their any income tax implications of shutting down your business? Business that are registered corporations are required to file taxes every year. Also, if you are incorporated you must officially wind down your corporation.
I am a civil litigation lawyer in Burlington
My address is 901 Guelph Line, Burlington.
You can also call or text at 416-505-4901 OR call Toll Free: 1 (800) 939-9211
anytime for a free consultation