Closing your business
The decision to close a business is usually due to one of two reasons:
- You no longer want to run the business and have no one to pass it onto.
- The business is not making enough money to keep going.
Whatever your reasons, closing your business can take time, depending on its size and complexity.
Here are some suggested steps to guide you through the process.
1. Make sure closing your business is the right decision
You may be thinking of closing your business due to financial concerns, a change in personal circumstances or because you find it hard to comply with government regulations. Before you do this, consider getting help or advice before you start closing, to see if you can put your business back on track.
Read our Deciding whether to sell or close page for information on what to consider when making the decision to close the business and the help that's available.
2. Set a closing date for your business
Setting a date to officially close your business from operations will help you to properly plan your business's closure. The earlier you set a closing date, the earlier you can start letting suppliers, employees, customers and other parties know.
3. Take care of your employees
If your business has employees, you must notify them and officially finalise their employment before your business closes.
Read Employees and selling or closing your business page for more information on what you need to do.
4. Notify suppliers and customers
If your business uses suppliers, you'll need to:
- let them know that your business is closing
- tell them the date from which you'll no longer need their services
- pay them any outstanding amounts.
It's also a good idea to let your customers know when you're closing the business. This will minimise their inconvenience, and may also maximise your profits right up until the date you close. How you let your customers know will depend on the type and size of your business, but can involve:
- posting a notice on your shop front
- posting a notice on your business's website
- personally advising customers
- advising customers through your business's social media channels
- holding a 'closing down' sale, with the added benefit of selling off your stock
- sending out an email or letter campaign.
5. End lease agreements
If your business has a lease, you'll need to end your lease agreement when your business closes. Depending on the conditions of your lease, you may still need to pay rent and other costs up until the end of the lease term.
You may be able to avoid paying these costs by transferring your lease to a new tenant. However, keep in mind that certain risks and conditions may apply to a transfer, depending on the lease agreement.
If you're unsure of the conditions in your lease agreements, you should contact your lawyer for professional advice.
6. Sell business assets and pay outstanding bills
Even though you're not selling the business, you'll still need to sell or manage your business assets when you close your business. Business assets can include:
- all outstanding stock
- tools, equipment and machinery
- property and premises, including land or buildings
- business vehicles
- furniture, fixtures and fittings
- domain names
- intellectual property such as patents or trademarks
- licenses and permits.
You'll also need to pay all outstanding bills when your business closes.
7. Deal with tax and legal matters
When closing down your business, there are a number of tax and legal matters you may need to deal with. Aside from finalising employee payments, they can include:
- cancelling your company and business name through the Australian Securities and Investments Commission (ASIC)
- notifying the Australian Tax Office (ATO)
- cancelling your Australian Business Number (ABN) via the Australian Business Register within 28 days of your business closing
- cancelling other tax registrations such as Goods & Services Tax (GST)
- making GST adjustments on your final activity statements
- lodging final tax returns
- looking at any insurance requirements for your business, such as run-off cover (where you are insured for any legal claims that are made after you close your business).
Also consider whether Capital Gains Tax (CGT) and GST applies to the closure of your business. For example, if your business is registered for GST, you may need to include GST in the price of individual business assets that you sell.
Find out more about taxes when closing your business on the ATO website.
8. Keep business records
After your business closes, you still have obligations to keep your business records, including financial records, customer records and employee records.
Depending on the type of record and the industry you're in, there will be different requirements for how long and how secure your records need to be kept.
Generally, records should be kept for a minimum of five years after they are prepared, obtained or the transaction is completed, whichever is latest. Records containing sensitive information will also need to be kept and disposed of in a way that is in line with the Privacy Act 1988.
The Office of the Australian Information Commission website has information on how the Privacy Act applies to small business.
The ATO also provides a record keeping evaluation tool for you to assess your business' record keeping and information management.
You can contact the ATO for any record keeping questions you may have.
9. Tie up other loose ends
Some other steps to remember when closing your business include:
- disconnecting services (telephone, power, water, internet etc.)
- redirecting your mail through Australia Post
- contacting your local government licensing authority to cancel any licenses or permits
- closing your business bank accounts
- cancelling your web hosting and domain name if you have an online presence
- shutting down your social media channels.
Check if there are any other requirements you need to take care of within your state or territory to ensure you successfully meet all your obligations when closing your business.
10. Look after yourself
Closing your business can be an emotional time. After all, you’ve probably put countless hours, money and energy into running your business. It's important to make sure you take care of yourself both mentally and physically during this time.
Read our tips on managing and reducing stress as a business owner.
Visit beyondblue for resources and information on managing mental health and counselling support.
What to do...
- Read our dissolving partnerships and companies pages if the business you're closing is a partnership or company.
- Find out more on bankruptcy, and your options if your business is closing due to financial issues.
- Watch the ATO's webcast on selling and closing your business.
- Contact us by phone, web chat or our online enquiry form for personalised business support.