Going Out of Business

      Advice on closing up shop, disposing of your business assets, and paying your taxes. September 16, 2013

Question
I started my shop in 2000. It was a one man deal but I've had as many as four employees. I decided a few years ago I like being solo instead of being a baby sitter, especially to employees that lost me money at times. I've had a couple great employees along the way as well. With the economy crash, the "kitchen builders" went away and I just got more work. I've always done the non-kitchen woodworking - the custom work that the kitchen guys could not/would not do. I've had nothing but good luck in the shop when it comes to money but in the last few years I got tired of all the hassles with the government, with the suppliers and everyone else I seem to do business with.

One day I had all I could take with the state sales tax folks (misapplied my tax payments again!) and I applied to teach science in middle school (BA in Biology) and got the job. It's something I've always thought I'd like and so far (2.5 years of it) I really like it. I have one problem - the shop just sits. I do just enough work to cover the monthly bills, about 1K a month. I rent the space, keep the insurance, etc.

I have all the tools including a panel saw, CNC, etc. I need or want. I looked at putting it in storage but the costs are not that different because I have so much stuff. I don't want to sell the parts off individually because then I can't work out of the shop. I would like to sell the equipment as package deal. When I think of the 1K/month I could put into a Roth IRA, it seems silly to keep going on as I have been.

What are my options? Any help or suggestions would be appreciated.

Forum Responses
(Business and Management Forum)
From contributor Z:
Contact other local shops and designers and get the message out. I would not rule out selling individual machines, as you may be able to get more for some then others and get rid of everything faster. I remember a supplier of mine that had a clearance section with 5k hinges that he wanted to discontinue. I said I would buy 1k, but he wanted to sell the whole lot. I told him to charge 5% more and divide into lots. They were sold in two days after sitting there for two months.

I work with a designer in Miami Beach that just bought out a small acrylic shop to add to her vertical operation and she kept the one employee. The owner wanted to retire and she saw the potential as she herself was a regular purchaser of his. My shop is in Ft. Lauderdale and there are still shops opening up here and they are often looking for well-kept used machinery.



From contributor F:
There are a few things to keep in mind regarding the IRS when selling your shop or equipment. If you took depreciation on the machines, you will have to recapture that portion that you realize back on the sale. You probably knew that. Also, if you just close it as a business but want to keep it to play around with, you will also have to recapture the depreciation.

If you want to do an owner carryback financing to a buyer, you will have to claim the full amount of recaptured depreciation the first year of the sale. This could easily be more than your cash flow from the buyer the first year. The IRS can cross-match your 941's and Schedule C's to find out if you are out of business but have not reported the recapture. I am in the same spot with my shop and got a jolt when I talked with my accountant.



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