If you are considering closing your business for good, there are several steps you will need to take.
But firstly, make sure you are certain this is what you want to do. You may find the government coronavirus stimulus, rental eviction moratorium rules, and recently announced plans to re-open the economy, may make continuing to operate a realistic and attractive proposition.
If you are sure closing is the right decision, here are the legal obligations you will need to meet. Keep in mind the rules will be different if your business goes into administration or is sold.
Give your employees notice
You will need to notify your employees that you will be closing your business and their employment will come to an end. You must officially give notice in writing or provide payment in lieu of notice.
Make sure you have given employees enough notice under their award or enterprise agreement and that you have honoured any other requirements under their agreement, such as giving them time to look for work if that’s required.
Pay out employee entitlements
You will need to pay out any outstanding employee wages or accrued leave.
This may include annual leave, long-service leave and any redundancy pay owing, but make sure you review the enterprise agreement or award, employment contract, rules in your state and rules for a business of your size, before taking any further action.
Finalise employee tax payments
Review whether you still owe employee superannuation, Pay-As-You-Go withholding, or fringe benefits tax and resolve any outstanding tax issues or payments.
Terminate your lease
If you are renting premises, a commercial lease will remain valid even if you close your business. To avoid paying out the remainder of the lease term, have your lawyer review the conditions in your lease agreement to see if you have other options, such as early termination with a fee or the ability to sublet (if you’re lucky enough to find a tenant).
You may also be able to negotiate with your landlord to surrender your lease, which is when both parties mutually agree to end the lease. This will usually involve paying a fee and covering the landlord’s legal costs.
Notify suppliers and pay outstanding bills
Let your suppliers know the business is closing and from what date. End any supplier agreements and pay any outstanding bills.
Let your customers know
Notify your customers that your business will be closing. This is best practice so customers are not inconvenienced and it also gives you a chance to clear stock and earn a little more before your doors close.
Manage or sell business assets
You will need to sell or figure out what to do with any business assets. This may include stock, tools or equipment, property, vehicles, furniture, domain names, patents, trademarks, licenses or permits.
Settle tax obligations
Talk to your accountant about your tax obligations. For example, you may need to make GST adjustments in your final activity statement or lodge final tax returns. Review whether capital gains tax will apply in your case.
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You will need to cancel any tax registrations within 21 days. This may include:
- Luxury car tax;
- Wine equalisation tax;
- PAYG withholding; and
- Fuel tax credits.
You will also need to cancel your Australian Business Number (ABN) via the Australian Business Register, and business name through the Australian Securities and Investments Commission.
End any insurances
You will need to alert your insurance provider that your business is closing to end any business insurances.
Keep business records
Every business needs to continue to keep business records (generally for a minimum of five years), even after closing down. This may include financial, employee and customer records. Make sure you hang on the required records and adhere to any privacy guidelines.
Finalise anything else outstanding
There will be several remaining loose ends to tie up, including closing bank accounts, ending business subscriptions, disconnecting services like internet or power, redirecting mail, shutting down your website and domain name, and closing social media accounts.
Conduct an audit of anything remaining and conduct the necessary steps to finalise things.