Closing a small business
Even after a company has stopped trading as a business, it will still be registered with ASIC. To save both time and money, you might decide to formally close your business. There are various ways you can close a company or deregister a business name:
- Deciding to close a small business
- Voluntary deregistration
- ASIC-initiated deregistration
- Winding up a solvent company
- External administration
- Cancelling your business name
- Video – How to close down a company in Australia
Deciding to close a small business
We know that small business owners put their heart and soul into their business. Ultimately, every business owner wants their business to be successful.
There may be different reasons why you want or need to close a business.
If your business has stopped trading, you should consider deregistering your company and cancelling your business name. This will mean you won’t have to pay annual fees or continue to comply with your legal requirements, such as keeping your personal and business details updated with ASIC.
If you think your company may be insolvent because it is unable to pay all its debts when they become due and payable you should consider getting advice on the options to wind up the company’s affairs.
Company directors have a legal obligation to act in the best interests of the business, which includes paying creditors, employees and tax debts when due.
When directors don’t act in the best interest of the business, they might be liable for breaching the law. Losing sight of these obligations and responsibilities can have serious consequences.
It’s important to recognise the point at which your business cannot be saved. When you reach that point, speak with trusted advisers and work out the options available and the consequences. These options may affect the company directors in different ways, and they may also have personal implications.
A company can be voluntarily deregistered in Australia if it meets all these requirements:
- all members (shareholders) of the company agree to deregister the company
- the company is not carrying on business
- the company’s assets are worth less than $1,000
- the company has no outstanding liabilities
- the company is not involved in any legal proceedings
- the company has paid all fees and penalties payable under the Corporations Act, such as company renewal and late payment fees.
When a company is deregistered it is removed from the register of companies and is unable to trade. A deregistered company ceases to exist as a legal entity and can no longer do anything in its own right.
A deregistered company can be reinstated. A reinstated company returns the company to registered status as if it were never deregistered.
Find out more at Information Sheet 25 Voluntarily deregistering a company (INFO 25).
We can initiate deregistration of a company when it has not:
- paid its annual review fee for at least 12 months after the payment due date
- responded to a company compliance notice (return of particulars) at least 6 months after the response was required, or
- lodged any other document in the last 18 months and we have no reason to believe the company is carrying on business.
Find out more at Information Sheet 10 ASIC-initiated deregistration of a company (INFO 10).
Winding up a solvent company
The members can close a solvent company using a members’ voluntary winding-up process. This process involves:
- the orderly winding-up of the company’s affairs
- appointing a liquidator to manage the process of realising the company’s assets
- closing or selling the business
- paying the company’s debts (if any)
- distributing surplus assets (if any) to members.
Find out more at Information Sheet 78 Winding up a solvent company (INFO 78).
Companies can be placed in external administration when they cannot pay their debts. This can be initiated by the director of the company or by a creditor who takes action to recover debts owed to it. An external administrator is appointed to undertake this process.
Find out more about insolvency.
Cancelling your business name
If you have a registered business name and have stopped trading as a business, you may also need to cancel your business name.
Video – How to close down a company in Australia
This video explains when a company can be closed, how to start the closure process and what you need to consider before you go ahead.
- Information Sheet 42 Insolvency for directors (INFO 42)
- Illegal phoenix activity – when a failed company is rebirthed
- Managing debt – Help for your personal finances