As companies reach a point where they need to close down their businesses, there are many factors to consider. This bulletin addresses frequently asked questions and provides guidance on now to minimize risks associated with the shutdown.
My business is dead and can’t be revived. How do I shut it down to minimize my risks?
- Shutting down a business that can’t be revived is an art, not a science. People often speak of tossing the proverbial keys to the business’s creditors, but as a practical matter, that usually doesn’t work. Lenders and other creditors are under no obligation to catch any keys that are tossed their way.
- You can contact us to obtain a detailed checklist of the issues that need to be addressed. Foremost on that list is ensuring that employees receive the wages, benefits, and vacation pay to which they are entitled. Such employee-related claims account for the vast majority of cases where creditors of a business assert claims against the owners for personal liability.
- In addition, there may be additional sources of recovery that are not obvious to you right now but that could be used to fund the wind-down of the business. For example: tracking down insurance premium refunds, especially where premiums were based on headcount or revenue figures that are out of date; security deposits; season ticket licenses; and intellectual property licensing or sale.
- See our Q&A regarding business owner guaranties here.
We will continue to provide any guidance on companies under distress. If you have additional questions, our Distressed Company Task Force can answer, please email firstname.lastname@example.org.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.