Money Rehab with Nicole Lapin - How to Close Up Shop

Episode Date: October 28, 2021

Whether it’s a job, a relationship, a partnership, or start-up— it’s always hard to call it quits. No founder wants to make the decision to close up shop, but the truth is, not every business works out. Of course, that fact doesn’t make that hard day any easier. But what might make this process a bit easier, is to understand in simple terms what you have to do in order to shut down your business. Today, Nicole lays it out. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. On Money Rehab, we've talked about how to monetize passions and turn them into side hustles.

It's a process I went through when I started my own production company, so it's an experience I know very, very well. We've covered how to know when your hobby is a good candidate for a jobby. And there will be many episodes to come all about building a business. But today we're talking about what to do when your work isn't working. Money Rehabber Eric calls in with this question. Hey, Nicole. I started my own personal training business two years ago,

but then the pandemic hit and it's just not working out. I'm losing money and I just don't think I have the bandwidth to turn it around. I'm pretty sure it's time to close my business. Starting the business was really hard and I feel like shutting it down is going to be much harder. I'm also worried that I'm going to do something wrong and to call like down the line years later saying I owe taxes and penalties that I didn't know about. I'd love to get your help. Thanks. First, I want to say, Eric, that I'm sorry your business isn't working out. A global pandemic is a really hard obstacle for any business to face head on, especially when it's a business that relies on meeting clients in person like personal training. But you are certainly not

the first entrepreneur who had to close the doors on their business, and you absolutely will not be the last. Tons of very successful people have had major career setbacks. Steve Jobs, Walt Disney, Oprah, you know, those types of folks. And I'm sure you remember when we had James Altucher on the show. He talked about how he's been at the helm of many sinking ships and how those experiences were the ones that actually taught him how to swim. Despite those facts, I know it's a really emotional and difficult thing to say goodbye to your business. But the steps themselves are actually, thankfully, easy. Here are the five things you will need to take care of in order to close up shop. Number one, file your final tax return. You have to file an annual tax return for your last year in business, even if you were only in

business for part of the year. All S-Corp, C-Corp, and LLC tax return documents have what's known as a denotation, more like a detonation if you ask me, that this is your final tax return. Check that box and then contact the IRS to close your EIN account. Nictionary note here, EIN stands for Employer Identification Number, and it's basically the tax ID for a business. Number two, file your final employment tax return. If you have employees or have had them in the past year, you will also need to file a final employment tax return. This includes submitting final federal tax returns on behalf of your employees as well. Number three, file for dissolution. Skip this step if you want to keep racking up

taxes and fees on a business that isn't running. Oh, wait, that doesn't sound like funsies, does it? Well, then you have to formally dissolve your business with the state you're in, which means more than just saying it's over. The government needs to know what the deal is so it can strike your business from listings and leave you alone. Filing dissolution papers is especially important if you have partners or other owners in the business as it prevents future confusion about ownership and liability. Number four, see what you can sell. Take inventory of what you have and see what you can sell, including licensed projects and templates, as well as software, office equipment, and even furniture.

Be sure to report all business assets using IRS Form 8594, the Asset Acquisition Statement, since you might be able to recoup some of your business losses by selling your stuff. If you can't sell it, donate it. Get the tax deduction instead. I mean, it's still something. Number five, cancel the paperwork. This includes licenses, permits, and insurance policies. Contact your city, town, or state's licensing office and cancel the licenses you took out. Then contact your insurance broker to cancel your team's health insurance plan.

Don't forget to cancel business liability and compensation insurance as well. No need to get a bill every month for that. I know that's a lot of paperwork that bogs down an already difficult process. Writing over and over that your business is ending really sucks. Let's just call it what it is. But I want you to remember that just because your business didn't work out doesn't mean that it won't work in the future. It also doesn't mean that you're a failure or that you don't have what it takes to be an entrepreneur. Running your own business is really hard in normal times. Throw in a pandemic and that difficulty gets magnified tenfold. I know you might be feeling some shame, Eric, but you should

actually feel super proud for making the tough but right decision. For today's tip, you can take straight to the bank. Don't be afraid of calling it quits. Not every business is going to work out. That's just the way free markets work. But don't let the fear of striking out keep you from playing the game. And if you do strike out, don't linger on the field. If you're losing money or losing sleep because of your business, it might not be the right business for you right now.

Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team, Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always,

thanks to you for finally investing in yourself so that you can get it together and get it all.