The day will come when you will no longer be at the helm of your business, perhaps because of unfavourable economic times, or because you’re ready to move on to a different phase of life. If you decide not to sell your business or pass it along to a family member, then you will probably want to close it. Closing down a business isn’t as simple as flipping a sign in the window and hauling out all your belongings, as you’ll need an effective plan to wind things up as efficiently as possible.
Take a look at the following tips so that you can close up shop efficiently and without stress:
1. Communicate Your Closure
If you are an employer, then you probably have ongoing obligations to your employees– suchas Pay As You Go (PAYG) withholding payments, Fringe Benefits Tax (FBT), Superannuation, and Eligible Termination Payments (ETP) – as well as moral obligation to give your staff fair warning that they’ll need to find another job. Additionally, customers and suppliers need to be warned as well, so that you can begin making arrangements for any final payments.
2. Deal With Taxes and Permits
Before you can officially close, you must deal with any remaining tax obligations, and cancel any licenses or permits. Your business or trading name can also be cancelled at the Australian Securities and Investments Commission (ASIC) website, and you can deregister your company there as well. Go to the ATO website for information on cancelling your ABN, GST, and all other tax registrations. One thing you will want to keep going until your doors officially close, however, is your business insurance policy.
3. Take Care of Premise and Leasing Responsibilities
If you are renting or leasing, then you may still be liable for your payments, even if your business closes before the end of the term of the agreement. To get around this, you can try to get the lease transferred to a new tenant before you close up.
4. Wrap Up Your Finances
To wrap up your finances, start with calling in any debts that are owed to you. The easiest way to do this is to hire debt collectors who will do the job for you to ensure a quick response. Next, start closing your business bank accounts, and selling off your products. If you want, you can even choose to liquidate, if you want to get help selling off all your business assets.
If you are closing because of financial troubles, then you will still have to liquidate, only, it will be compulsory for wrapping up your debts properly. If you don’t, then one day, you could get served a Director Penalty Notice, which would make you personally responsible for your company’s tax debt.
Additionally, if you cease trading and you have outstanding creditors, then they will also pursue you for payments. So the only effective way to safeguard yourself from personal financial troubles, after your business is closed, is to put the company into liquidation and let the liquidator deal with creditors instead.
5. Maintain Your Records
You’re not finished yet! By law, you are still required to maintain your tax and employment records for another 3-7 years following closure. So make sure you hold onto these if you are ever audited, or if you need them for your personal finances.