Whether you are running a company or operating as a sole trader or partnership, there are a few legal considerations to keep in mind to ensure you’ve finalised everything before you close your business.
Informing your employees that you have decided to close your business may be difficult, but it is important to notify them, not only because you may have worked together for a long time, but also because you are legally obliged to do so. You need to provide employees notice in writing that you will be ending their employment to close your business and it must be done within the requisite time period. If it is not, you may be liable to pay outstanding wages in lieu of notice. Other entitlements may also need to be paid out depending on your Employment Agreement. These can include accrued leave, redundancy, or long service leave. You will also need to finalise tax issues such as fringe benefits tax, pay as you go (PAYG), superannuation and any tax deducted from employment termination payments.
If you have ongoing existing arrangements with suppliers, you will need to notify them of the date you intend to close your business. You will need to terminate any existing agreement operating between you and the suppliers and pay any outstanding amounts.
When you close your business you also need to end your lease agreement if you are operating in a premise. The lease agreement will need to be reviewed in order to determine whether or not you are required to pay rent or other costs or if you can just end the lease term. An option some businesses take is to transfer the lease agreement to a new tenant.
Although you are planning to close your business, you may still have assets that need to be sold. This could include inventory, vehicles, land, equipment, intellectual property or licenses and permits. The money derived from the sale could be used to pay off any outstanding bills.
Tax and Legal Administration
When closing your business you also need to close any existing agreements and inform the relevant government agencies. For example, you may need to cancel your insurance policy, inform the Australian Taxation Office that you will no longer be conducting business, cancel your business or company name with the Australian Securities and Investments Commission or cancel your Australian Business Number with the Australian Business Register.
For whatever reason you’re choosing to close your business, planning ahead is key to ensuring that you have covered all bases. If you have a particularly large or complex business, closing up can take time! Take note of everything that needs to sold, any debt that needs to be paid back or any agreement that needs to be ended and remember that after your business closes, keep your business records for at least five years!