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If I have to close my small business, do I have to refund any gift certificates that were purchased?
Anonymous9 views4 answers
My wife opened a business in October in West Des Moines. Business was good up until the end of the year. In January profits began to fall sharply, which made her have to get a full time job. Now that she is working a full time job with the military just so we can make ends meet, she no longer has the time to operate the business. We are closing the business when we can afford to buy out the cell phone contract that was purchased for it. This leaves the question of what to do with gift certificates that were purchased and have not been redeemed yet. Does her military orders nullify any obligations with the business?
Why would her military obligations interfere with her contractual obligations? Your wife should return the money for the unused gift certificates. Those people are creditors of the business and of her if she did not set up an entity.
A limited liability company should be formally dissolved and terminated pursuant to the Revised Uniform Limited Liability Company Act (RULLCA), which is adopted in Iowa. This requires filing a statement of dissolution, notifying creditors (including gift card holders), winding-up other affairs, and finally, filing a statement of termination with the Iowa Secretary of State. The assistance of an attorney is highly recommended. Working with the U.S. military does not nullify prior contractual obligations.
You should speak with a business law attorney in your area. There are federal and state laws governing gift certificates. As far as your last question, I am guessing you are referring to the Servicemembers Civil Relief Act (SCRA). The only provision in the SCRA that may be helpful that comes to mind is that judicial proceedings can be delayed for a period of time. The way your question is worded ("full time job with the military") makes me question whether the SCRA would be applicable, however. But again, your consultation with an attorney will help you answer these questions.
Morally your wife should absolutely issue refunds or make arrangements with a similarly situated business to honor the gift certificates. Legally you also have an obligation to refund the gift cards. If you fail to honor the gift cards any aggrieved party may file a small claims action against you. There is no criminal liability attached to not honoring gift cards unless you knew you would not honor them at the time they were sold; that would be fraud.
