Close or sell your business

Create a thorough plan to transfer ownership, sell, or close your business. Get qualified advice and know what to do to tie up loose ends.

Content

  • Close your business

  • Sell your business

  • Transfer ownership

  • File for bankruptcy or liquidate

Close your business

Closing your business can be a difficult choice to make. The am.business can connect you with local guidance in planning your exit strategy. It’s also helpful to seek advice from your lawyer and a business evaluation expert, along with other business professionals including accountants and bankers.

Follow these steps to closing your business:

  1. Decide to close. Sole proprietors can decide on their own, but any type of partnership requires the co-owners to agree. Follow your articles of organization and document with a written agreement.

  2. File dissolution documents. It must be submitted to the State Register of Legal Entities in Yerevan or another major city in Armenia. Information in web: www.e-register.am/en

  3. Cancel registrations, permits, licenses, and business names. Protect your finances and reputation by canceling any of these that you no longer need, including your trade name.

  4. Comply with employment and labor laws. All details can be found in the Ministry of Labor and Social Relations oa Armenia www.mlsa.am

  5. Resolve financial obligations. Handle final returns for income tax and sales tax. Cancel your Employer Identification Number, notify state tax agencies.

  6. Maintain records. You may be legally required to maintain tax and employment records, among other files. Common guidelines advise keeping records for anywhere from three to seven years.

Sell your business

After careful consideration, you may decide to sell your business. Sound planning can help ensure you cover all your bases.

Use business valuation to set a monetary value before marketing to prospective buyers.

Accurately value all property and real estate tied to your small business. This can include intangible assets like brand presence, intellectual property, customer information, and projection of future revenue.

When you’re figuring out how much your business is worth, consider these common valuation methods:

  1. Income approach. Looks at projected revenue and accounts for potential risks.

  2. Market approach. Compares your business to other similar businesses that have recently sold.

  3. Assets approach. Subtracts total business liabilities from the total value of all assets.

Make a sales agreement

You must prepare a sales agreement to sell your business officially. This document allows for the purchase of assets or stock of a corporation. An attorney should review it to make sure it’s accurate and comprehensive.

List all inventory in the sale along with names of the seller, buyer, and business. Fill in background details. Determine how the business will be run prior to close and the level of access the buyer will have to your information. Note all adjustments, broker fees, and any other aspects relevant to the terms of agreement.

Don’t leave out any assets and liabilities, or this can create problems even after the sale has been finalized.

Transfer ownership

Many small business owners will face a time when they need to transfer their ownership rights to another person or entity. You’ll have a few different options available for doing so.

Option: Outright sale

Scenario: Liz owns a local clothing boutique that hasn’t performed well. With several other businesses on her plate, she can no longer afford to continue running it. She needs a quick exit and quick cash.

Benefit: By selling a business in full, you will transfer ownership immediately and receive payment right away.Gradual saleBill owns a market near his home. After the birth of his granddaughter, he now spends most of his time at his daughter's home several hours away.

Option: Gradual sale

Scenario: Bill owns a market near his home. After the birth of his granddaughter, he now spends most of his time at his daughter's home several hours away. After transferring business ownership, Bill no longer has to worry about running his business but is still receiving a monthly income.

Benefit: This option often benefits individuals that can’t afford an outright sale, but instead are able to finance a long-term payment plan. A gradual sale is a flexible option for transferring a business.

Option: Lease agreement

Scenario: Barbara has decided to take a year-long cruise around the world. To take care of her day care center she's decided to transfer ownership to a friend through a lease.

Benefit: By transferring your business ownership through a lease, you'll commit to a contract that details the conditions and payments you'll receive for the temporary rights to the business.

Other considerations

Transferring ownership of a family business may have legal impacts, such as estate and gift tax obligations. A transfer of property would also likely require taxation.

It’s also important to understand how to approach the exit strategy based on business type. You may want to consult with a lawyer to see which additional rules could apply.

File for bankruptcy or liquidate

A forced exit has implications for your employees, assets and tax obligations.

During a bankruptcy case, you need to stay up to date with all filing requirements and taxes.

Liquidating assets usually comes as a last-resort strategy after no buyers, merges, or successors appear on the horizon. This process of redistributing assets to creditors and shareholders still requires a sound plan of action.

Before terminating your lease, selling equipment, and disconnecting utilities, talk to your lawyer and accountant. They’ll help you develop a plan to present to creditors, whose cooperation you need during this process.

Reference these steps in the asset liquidation process.

  1. Prepare an inventory and determine assets for sale

  2. Secure your merchandise

  3. Set liquidation value of assets with a qualified appraiser

  4. Use that value to estimate net sale proceeds and re-evaluate your decision

  5. Choose sale type: negotiated, consignment, internet, sealed bid, or retail

  6. Select the best time and location for your sale

  7. Hire an auctioneer, dealer, broker, or other expert to conduct

  8. Use a non-recourse bill of sale so buyer accepts the associated risk

Copyright U.S. Small Business Administration