Closing a business can be a complex process, depending on your business structure and size.
Generally businesses close because the owners:
- are not making enough money to keep operating, or
- no longer want to run it.
There are some key tasks to consider including:
- cancelling your business registrations
- meeting your tax requirements
- notifying employees and ensuring they receive their entitlements
- ending or assigning lease agreements
Find out more about essential exiting tasks when closing a business.
You will also need to consider the points below.
The structure of your business will determine the closing process.
- Conclude any ongoing contracts
- Sell stock
- Collect outstanding debts and pay creditors
- Notify interested parties, such as banks, suppliers, registering bodies
- Cancel your registered business name with ASIC
Generally a partnership can be dissolved if all partners agree, or in the following circumstances:
- One partner gives written notice to the other partners
- A partner can no longer legally own a business
- The partnership term has expired
- There is a court order
- A partner dies
- The business has become bankrupt
For more information read our guide to ending a partnership.
To wind up a company you need to ensure the following conditions have been met:
- All members of the company agree to deregister
- The company is not carrying on the business
- The company’s assets are worth less than $1,000
- All fees and penalties payable under the Corporations Act 2001 have been paid
- There are no outstanding liabilities
- The company is not party to any legal proceedings
For more information visit the ASIC website.
You may be required to:
- Lodge your final tax return with the ATO
- Close bank accounts
- Deregister your ABN
- Wind up the trust
Bankruptcy and liquidation
If your business has debt it cannot repay it may decide to go into bankruptcy or liquidation.
Bankruptcy applies to sole traders or partnerships. Declaring bankruptcy means you acknowledge by law that you are unable to pay your debts.
Bankruptcy usually last for three years, however, it will also be included on your credit report for up to five years, or longer in some circumstances. While you are bankrupt you will not be able to run another business or work in some professions.
Liquidation applies only to companies and occurs when they cannot pay their debts. Once the company has gone into liquidation assets may be sold to pay the debts. Liquidation, along with voluntary administration and receivership, are the most common forms of insolvency.
Visit the ASIC website for useful information on insolvency for company directors.