Legal requirements for closing a business

Depending on your legal structure, all or some of the following points might apply to you when you voluntarily close your business.

Cancelling your business name

You must cancel your business name within 28 days of closing down.

Obligations to employees

You are required to notify staff about terminating their employment or else provide them with payment in lieu of notice. Permanent employees will usually be owed entitlements when your business closes and their employment ends. These entitlements could include accrued annual or long-service leave.

You must finalise all tax issues for your business, even if it is no longer trading. This includes your obligations for fringe benefits tax, pay as you go, superannuation and employment termination payments. Learn more about your obligations to employees.

You will also need to cancel your workers' compensation accident insurance policy by following instructions on page 4 of the WorkCover understanding your workers' compensation accident insurance policy

Tax obligations

There are certain taxation deadlines and obligations you must meet. For example:

  • if your business is registered for GST you have to apply to cancel GST registration within 21 days of ceasing business
  • if you have an Australian Business Number (ABN), you'll need to notify the ATO within 28 days of ceasing business
  • before you cancel your ABN, you must lodge all activity statements, complete your pay as you go (PAYG) withholding obligations and ensure you meet your tax liability.

Run-off cover

If your industry or business requires you to have professional indemnity insurance, you will still need to keep a policy (called run-off cover) after you close your business. Because your liability does not cease when the business closes, run-off cover is designed to protect you from future litigation.

Deregistering or winding up a solvent company

There are 2 ways to close your company if it is not in financial difficulty or insolvent:

  • You can apply to ASIC to voluntarily deregister your company. Your company must first meet certain legal requirements.
  • Members of the company may decide to voluntarily wind up the company.

Consider talking to a business adviser to determine which option is appropriate for your company.

Learn more about deregistering or winding up a solvent company.

Dissolving a partnership

Partnership agreements are legally binding contracts that set out the rules for a business operating under this legal structure. Partnership agreements usually specify conditions under which the partnership will be terminated and how assets will be distributed among partners. Be sure to get legal advice before winding up a partnership.

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