Can I just walk away from my business?
Whether you can just walk away from your business depends on the type of business you run. If you have a brick-and-mortar establishment, debts, ongoing contracts, vendors, employees, assets, and a formal corporate structure, you will likely have to take some legal steps before walking away from your business to avoid penalties, fines, or other consequences.
Stay and lean on managers
If you have a reliable manager for your business, stepping away could be as simple as adding a few more responsibilities to that manager's plate. Unless your business relies on your own unique talents, hiring a manager can often free up your time to pursue other ventures, or just enjoy life.
Sell or dissolve your business
If you are ready to retire, you may want to sell your entire business, or liquidate it and wind down. If you are a sole proprietor, you may want to sell your business, or dissolve it. Ending a sole proprietorship may require that you file the appropriate documents with a local or state government. Failure to do so may open you up to continued tax and filing obligations.
Dissolve a partnership
Businesses with multiple partners may require more careful planning before stepping away. Partners may need to be bought out or partnerships dissolved. If there are multiple partners in the business, then a Dissolution of Partnership Agreement may be the solution. Once the document is signed, the partnership still has to wind down to settle debts, sell assets, and file Articles of Dissolution with the state.
File for bankruptcy
If your business is failing, bankruptcy may be an option. After a bankruptcy, you may be able to walk away from your business without debts following you, or with a plan to clear those debts. However, depending on how the business is organized and the type of bankruptcy petition you file, personal debts may not be discharged.
Further, some businesses have lots of assets, including expensive equipment. A business owner may opt to sell its assets with the business, piece-by-piece, or lease the assets to someone else.
What are the signs that I should walk away from my company?
There are typically two main considerations when deciding to sell, close, or just step back from an active role in your business. There are financial signs, and there are personal and emotional signs.
Financial signs that it might be time to step away typically include cash flow and debt problems. When business and sales are down or you borrow more money than your business can pay back, thinking about an exit plan may be a good idea. If your business is no longer generating revenue, then it might be time to walk away before debts become insurmountable. On the other hand, if you are burned out and finances are suffering, or even if revenue is stable, hiring a motivated business leader to take over may be able to get the cash flowing again.
The personal and emotional side of running a business can also be a motivating factor when it comes to choosing to step away. Running a business can be stressful and exhausting, even when things are going well. Too much stress can have a big impact on your health and morale. If the excitement that you had when you started the business is gone and you dread going to work for yourself, it might be time to rethink your role. Remember that stepping away does not have to mean closing.
What are my options if I want to quit my business but keep the doors open?
If you want to keep the business open but relinquish management, you may have several options.
Hiring a manager or management team may be able to lighten your load as a business owner. While this may cost a significant amount of money, it allows a business owner to generate income more passively. Similarly, if your business is established and revenue is steady, leasing it as a turnkey business can be profitable and include continued profit sharing for you. Additionally, turnkey businesses are often an attractive option for buyers and investors.
If a business owner does not want to lease or sell the entire business, they can set up a silent partnership with investors. As a silent partner, a business owner can take less of a role in the day-to-day management and business operations of the company. Instead, their main contribution is the business they started, while the new partner(s) will provide the management and day-to-day operations.
How do I legally transfer ownership of my business to someone else?
There are several ways to transfer legal ownership of a business. Before selling a business, completing a Sale of Business Assets Worksheet is helpful to get organized.
When you decide to entirely sell your business, you might want to sign a Business Sale Agreement with the buyer. The Business Sale Agreement sets the terms of the sale. If you plan to sell only part of your business, or the agreement involves complex terms, speaking with a lawyer is always a good idea. A lawyer can make sure the agreement says what you want it to say, and that you are protected if things go wrong.
If you are thinking about closing, selling, or stepping away from your business, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.