Estimating Inventory Loss at Business Closure
When closing a business, inventory rarely sells at full cost. Going-out-of-business sales, rushed liquidations, and disposal all result in losses. Planning ahead and starting the process early gives you the best chance of recovering more of your investment.
How to Dispose of Closing Inventory
- Liquidation Sale: Deep discounts to clear fast. Expect 30–60% recovery
- Supplier Returns: Best option for unopened items — often full cost recovery
- Liquidators / Wholesalers: Bulk buyout for 10–30 cents on the dollar
- Charitable Donation: Write off fair market value as a deduction
Frequently Asked Questions
Start 2–3 months before your planned closure date. Stop placing new orders immediately when closure is decided. This gives time to sell through naturally before deep discounting begins.
Items with no market value can be written off as a loss on your final business tax return. Donate to charities for a potential deduction if items still have value. Document all disposals.
You can, but sales must be at fair market value to avoid IRS issues. Below-market sales to related parties may be scrutinized and could affect your loss deduction.