We understand this is a difficult time for you, and this guide will take you through the steps you should consider to close a business.
The most common reasons for closing a business include the business is no longer viable, costs exceeding income, or you wish to retire, and the business has no value without you.
WHY should you close a business?
There is a fine balance between the emotional desire to be successful and the reality of financial stability. A decision to close your business might not be needed if you get some help from a business advisor or an accountant. Similarly, they may also recommend closing your business is the best action. Unfortunately, the truth can be the most painful thing to accept.
Recognising that it is time to close your business may save you from further debt that will still need to be repaid.
If you are closing your business to retire, this can be an exciting time to start a new chapter in your life.
If you are in doubt, these are key indicators that should encourage you to question your business viability.
- You feel you should close
- You are losing money
- Your goals are not being met
- Many customers but no profits
- Your product or service is not needed or wanted
- Nothing you have tried has worked
- Marketing is making no difference
- Competitors dominate your industry
- No long-term customers
- Your dream is not the reality
- Home and work life is suffering
- Employees are leaving
- Your health is suffering
- Trouble sleeping
- You have become negative and angry
WHAT are the steps to close a business?
Once you have decided to close your business, it is best if you work on a plan to achieve this.
The first step is to decide on a date that will allow you to accomplish the following tasks:
- Notify your employees. This will be difficult for them as well, and you will need to pay out any outstanding wages and leave. Also, ensure that the employee’s superannuation has been paid.
- Suppliers. Let them know the date and plan to pay any outstanding debts.
- Notify your customers. It would be best if you showed those who have been loyal to you the courtesy of letting them know you can no longer supply them. This could be done with a sign on your website or a phone call. It may also be an opportunity to sell off any remaining stock or assets.
- Pay outstanding bills.
- Cancel services, including the Internet, power, bank accounts, web hosting, social media accounts, etc.
- Sell your business assets. These can include stock, fixtures, tools, machinery, intellectual property and domain names.
- End lease agreements. This could be for machinery or property but remember, based on the terms you have in your lease agreement, you may still be obliged to continue payments until the end of the lease term.
- Taxation responsibilities. You must pay outstanding taxation debts, including income tax, GST and capital gains. There is also a requirement for you to post final tax returns and a final GST activity statement.
- Cancel your ABN. https://www.abr.gov.au/business-super-funds-charities/updating-or-cancelling-your-abn/cancel-your-abn
- Cancel your business name. https://asic.gov.au/for-business/cancel-your-business-name/
- Keep business records. Records should be kept for a minimum of 5 years after you close.
HOW can I get help to liquidate?
The following resources may be useful in helping with this process:
Your accountant and or business advisor can assist you with the decisions to keep, close or sell a business. Business advisors can be found here https://www.business.gov.au/expertise-and-advice.
Suppose a registered company becomes insolvent and goes into liquidation. In that case, a liquidator must be appointed to take control of the company so that its affairs can be wound up in an orderly and fair way for the benefit of all creditors. More details on this can be found here https://asic.gov.au/regulatory-resources/insolvency/insolvency-information-for-directors-employees-creditors-and-shareholders/.
Auction houses like Grays Online can provide a means to sell off your excess stock and assets.
Bankruptcy is a legal process when you are unable to pay your debts. It is a means that allows you a fresh start but may affect your ability to get credit, travel overseas and gain future employment. More details https://www.afsa.gov.au/insolvency/cant-pay-my-debts/what-bankruptcy
National debt helpline provides free financial counselling https://ndh.org.au/ or 1800 007 007
Crisis support – Lifeline.org.au or 13 11 14
Mental health – Beyondblue.org.au or 1300 22 4636
Family dispute resolution – Relationships Australia https://www.relationships.org.au/what-we-do/services/family-dispute-resolution
HINTS
The Australian tax office provides a business viability tool to help determine if a business is still viable. https://www.ato.gov.au/Calculators-and-tools/Business-viability-assessment-tool/
SUMMARY – a big decision for any small business owner
Closing a business is a big decision for any small business owner. Be sure that you are making the right decisions and not emotional ones. If your business is not going well, be careful in taking on additional debt. Create a plan around closing your business and make sure you do the best for those who have supported you, like employees, customers and suppliers. Don’t be afraid of asking for help. There are several free services to support you.