Closing a Business SUCKS
Closed a business this week.
$500 to Open a Business, $2k to Close it
It was 4x more expensive to close it, than to open it.
And took 4x the time as well.
I opened with ease via Stripe Atlas a year ago in about 2 weeks. Filled out a few forms and got everything in a neat dashboard.
It's been now 2 months since deciding with my co-founder to end the business. and we started trying to close accounts and end the company day 1 of that decision. It's finally done now, 2 months later.
In thick of it, when I thought I was going to pay $2,200 to an accountant to file the final taxes, I sent an email to Stripe.
This Could Be Better
I asked Stripe if they could make a Stripe Atlas in Reverse.
A sort of Company Bereavement service.
While I understand the legal ramifications of why it's not so easy and simple to close a business, taking 2 months to talk with lawyers, and file appropriate forms and close accounts, sucks.
Focus Drainer
Now I start on a new project, it's just a project. I'm almost traumatized by this experience so much that I won't start a company in the near future.
And the worst part of all of it was the time, the energy and focus, on something that was ending.
I had worked for two years under the guise of Seth Godin's the Dip. Quit if you're not going to win. Because Winners actually do quit, and quit a lot. And all of a sudden, legally, I couldn't do it. I couldn't quit.
What If?
2 weeks in I thought about not closing the business and just letting it sit for another year. But then I quickly realized if I didn't do anything, it would get worse. I'd have to spend more money and more time (filing 2021 taxes of $0 and paying franchise tax for a company I wasn't using)
If you're going through hell, go faster.
I'm glad I went through the whole process. If you're going through this in any capacity, comment below.
I did some initial figures for Stripe in my email based on number of estimated new Atlas customers and how many businesses on average fail within 1 to 2 years. I think it's a good $3M to $6M business to help close companies for founders who would rather than taking 2 months, just pay $1,000 and be done.
Interesting to learn more about the process that isn't shared very frequently.
After experincing the problem, had you considered trying to build your own solution at all?
Yes , considered. Need to productize a few law processes which is out of my wheelhouse.
I'm actually in the process of closing one of my businesses now (selling physical products B2C), and it's good deal of effort.
That said, the operational part of the closure seems to be more work than the legal or accounting side.
I'm using our Corporate service to dissolve the LLCs (in two states), our bookkeeper is doing what she always does to do the accounting, and our CPA will file our last LLC tax return in 2021 for 2020 -- we're winding down everything by end of year.
I'm not really worried about the cost so much, because the business is paying for the wind-down, and as such, it lowers our tax liability. If your business has no revenue, and you have to pay out of pocket, that definitely sucks. But, you'll be able to take it as a write-off, so it'll lower your personal tax liability.
I'm planning to write a post about this here on IH, but the irony of closing is that we had our biggest revenue month of all time in October (by multiples) as a result of sending out the announcement of us closing down.
Looks like we might live in the same area? (Los Angeles)
That really surprised me! Do you have any explanation for that?
Customers wanted to stock-up before we were all sold out :)
In fact, I didn't even put anything on sale. Customers just wanted to ensure they had enough of our product to last them several years.
Nice! That shows that despite not being profitable enough you've helped some people out there. :)
Thanks for your insight, some of the points here are really useful. Closing a business really can be painful and draining, but if you do it fast, you can save yourself lots of time and energy.
One of my friends, however, is planning to move to LA, he found some good restaurant equipment movers there. That might seem crazy in these times, but he's pretty experienced, so I just wished him well. Restaurants are open again, but there are still some restrictions.
I have been through the same thing, and it was emotionally draining because it is work without upside. What helped was sitting down with with my partners and chatting about what we had learnt and how that is helping with our new projects. It gives some purpose and upside to the process! Great that you have raised this with Stripe - it would be a point-of-difference fo them as a company if they had a great reputation on helping people out as well as in.
Yes, compiling lessons learned is helpful. For about 2 months I couldn't actually answer the question "So what did you learn from this experience?" It took a LOT of work to get an answer.
This really shouldn't be a surprise to anyone who can calculate the cost for bookkeeping, accounting and doing taxes. I know that I have so pay at least 2K€/year even if I don't do anything with my German GmbH, just to file taxes and stuff.
It is a surprise for those who can't calculate the cost for bookkeeping, accounting and doing taxes.
I also sensed a bit of freedom in closing. Yes, the legal stuff sucked, but I would be free from all responsibilities afterwards.
Yes freeeeedom. Sweet sweet Freedom.