Closing a business

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.

Business structure

The structure of your business will determine the closing process.

Sole trader

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

Partnership

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.

Company

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.

Trust

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.

Tip

Deciding to apply for bankruptcy is very serious and you should first consider all available options and seek professional advice. More information about bankruptcy is available from the Australian Financial Security Authority (AFSA).

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.