8 Steps to Temporarily Closing a Business
This is an unprecedented time that has forced many small business owners to make the difficult decision to close their business. Some businesses have chosen to close permanently during this pandemic, while others are temporarily shutting the doors.
A temporary closure requires a little more than hanging a “closed” sign and locking the door. The recognition of a closure needs to go further than the patrons and be recognized federally and by the state. There are proper steps that must be considered when temporarily closing and today, we take a look at those 8 steps.
1. Contact Your CPA
During a period of transition or closure, your CPA will be your best friend. It’s important to be strategic and to create a game plan to ensure nothing is missed, and this is where that expert excels. That being said, in these situations it’s wise to seek help from an advisor or CPA as they’ve traditionally acquired enough experience in this arena with other businesses to understand the appropriate process.
2. Notify Your Staff
When it comes to temporarily closing, you must communicate, communicate, communicate. Your staff should be one of the first groups of people to know, and they should be kept informed throughout the process. This will also give them the time they need to address unemployment or COBRA benefits that they will possibly need while the business is closed. (You can find COVID-19 related unemployment benefit information here.)
Having this open and honest conversation with them in an environment where they can ask questions likely won’t be easy, but it’s one of the most crucial steps as it can impact whether or not they choose to return once the business reopens.
From a payroll standpoint, if you intend to retain certain employees, it’s important to let them know about their hours being modified and be sure to continue payroll for those people during the closure period.
3. Inform Clients and Vendors/Other Service Providers
Keeping patrons, investors, suppliers, vendors, etc… well informed about the temporary closure of your business is crucial. To do this, you can post notices on your website, storefront, social media pages, and on Google/other search engines. Continue to post updates on your website and accounts to keep customers up-to-date about the status of your business and to keep them checking back for when you reopen.
Be sure to contact vendors and suppliers to temporarily suspend supplies and inventory as this will reduce your operating expenses during the closure. Try to reduce inventory during the awareness window and the actual closure to prevent wasted product.
4. Contact Your Financial Institution/Bank
If you need to close your business temporarily due to an emergency (like a global pandemic) or low cash flow, reach out to your bank or financial advisor to see what options you have.
There are a number of loan, line of credit and grant options out there for small businesses, which can help you recover more quickly from your situation and reopen your doors earlier.
If loans are intimidating or off-putting for you, there are other alternatives that you can discuss with your financial advisor or CPA such as creating a new budget.
We have compiled a list of loan and grant options that are available here. Be sure to check with your CPA, financial advisor, bank, or lender to find out which options are available to you and best fit your business.
5. Provide Unemployment and COBRA Information to Staff
If you have to temporarily lay off or furlough your staff because you are temporarily closing, you must provide the employees with state unemployment and Consolidated Omnibus Budget Reconciliation Act (COBRA) information.
COBRA allows employees, covered spouses, and dependents to continue their group health insurance coverage if they become ineligible for your company’s plan.
Keep in mind that you must offer COBRA coverage to employees if both of the following are true:
- You employ at least 20 FTEs on more than 50% of your typical business days in the past calendar year
- You offer a private group health plan to your employees
If you’re temporarily closing and laying off employees due to the COVID-19, your state may provide a mass-layoff number for employers to use. This number may prevent your employer account from being affected. It also speeds up the unemployment insurance process for employees so they can receive benefits sooner.
6. File the Necessary Unemployment Forms
As an employer, one of the most critical responsibilities you have is filling out and filing employment and payroll forms. This responsibility doesn’t stop when you temporarily close your business. Some of the forms you may need to file while temporarily closed include:
- Form W-2
- Form W-3
- Form 940
- Form 941
- Form 944
- Forms 1094-B and 1095-B
Your CPA can help you to define which of these documents applies to your business. Keep track of due dates for these forms to ensure you stay compliant and don’t miss deadlines even when your business is temporarily closed.
7. Document, Document, Document!
If you’re planning on temporarily closing your business, it’s vital that you keep detailed records about closure dates, employees who were laid off temporarily, any workers you paid during the closure, and transactions (if any) you had during the shutdown period.
Keeping records is especially important when a temporary store closure is something outside of your control (for example during a global pandemic). If you’re planning on taking out loans such as the Paycheck Protection Program (PPP) or taking advantage of a credit such as the Employee Retention Credit, you must keep thorough records to back up your claims.
8. Be Aware of (and Comply with) State and Federal Laws
If you’re temporarily closing, make sure you know your federal and state laws or have someone on your team that does. You should also understand employment laws in your state to find out which ones you need to follow to ensure you’re compliant, especially if you’re laying off employees.
If you’re temporary closing your business due to COVID-19, stay compliant with new legislation, including the:
- Families First Coronavirus Response Act (FFCRA)
- Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
Closing a business temporarily or permanently can be a complicated process, but engaging the right team can make it much easier. If you have questions on any one of these steps, or want to look at starting the process, contact our experts today. We’re here to help!