Closing your business can be a very stressful time. Not only are you shutting down a chapter of your life, but you also must notify those you have done business with, such as supplies, customers, and banks. The experts at Royal Legal Solutions truly understand how hard the final days of business ownership can be. State laws, federals regulations, and ethical business practices all play a role in when you should notify creditors of your closing. For the most part, however, when and how you notify a creditor depends on one of three factors: if you need to continue receiving services, if you have any of their property, and if you own them money.
How to Notify a Creditor
When you send a certified closing notification letter to your creditors, which is an important legal move, you should include the state-regulated timeline with which they have to file any claims with you. This deadline, any important information they may need, like the address to which the claim should be sent, should provide clear, concise directions. Typically, if a creditor receives this notification and does not submit a claim by the deadline, a corporation or LLC can ignore it. In the case of a corporation or LLC, states typically regulate the claim period to be between 90 and 120 days. (For sole-proprietors and partnerships, however, this timeline works differently.) To help cover your bases, publishing your closing information, creditor claims request information, and other such details to a local newspaper and your website can ensure you do not miss any of your creditors.
Notifying Creditors of Continuing Services
In some cases, you may need to continue receiving materials, or inventory, right up until your doors close. In this case, you should only purchase supplies that you know you will be able to sell. For these types of “supplier” creditors, you can wait until the last shipment to notify them. Depending on how often you order supplies, this may occur months, weeks, or days before your close your business. Experts recommend you send a certified letter notifying these types of creditors of your business closing and request any outstanding invoices be issued.
For service providers, like utility companies, you will need to notify them of your closing date at least a few days before shutting your doors. Many of these companies will prorate your fees. This means, if you close your business on the third of the month, you likely will not need to pay for the entire month of service. If you have a long-term contract, however, you will want to notify them in timely manner, as dictated in your agreement. This will help you to avoid early termination fees that may pop up if you pre-maturely end the contract without notice.
Notifying Creditors Whose Property Is In Your Possession
In some cases, you may have a creditor’s property, such as a van you used as collateral to take out a loan, in your possession. If this is the case, the creditor may allow you to return the property to them voluntarily as a surrender. Alternatively, they may allow you to sell the property and use the proceeds to repay the loan. If there is a lien on the property, some lenders will agree to remove it to allow you to sell it. Others will require you and the buyer to include them in the deal before removing the lien.
Notifying Creditors to Whom You Owe Money
If you have taken out a loan or line of credit with a bank, you will need to examine your loan agreement before notifying them of your closing. (In fact, you may want to pay off any other debt you have incurred prior to notifying a bank. Some agreements allow the bank to immediately deduct the remaining balance from your business account. Depending on how much you owe, this could financially devastate you even more.) Bank creditors typically have one of two reactions. They may call for the entire loan balance to be paid in full immediately. Alternatively, they may inquire about how you plan to fulfill your obligations to them.
Negotiating with Creditors
Once your notices have been issued and have received any outstanding bills, you will need to settle your debts. Royal Legal Solutions can help make this process easier on you. With years of experience, our professionals can negotiate on your behalf and assist you in reducing your overall balance. We know the laws and regulations that govern these debts. Whether you are considering closing your doors and just want to talk to a professional about your options or you have already issued your notices, our experts are ready to help.