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Before you start taking steps to close down your business, you should discuss other alternatives with an advisor or mentor. If you are experiencing financial difficulty, but your business plan is strong, you might be able to change your business model or get funding from investors or banks. If you have decided that closing down is the best option for your business, then you should follow the correct process to avoid breaking the law. This article provides information to sole traders, partnerships and companies on their legal and tax obligations when closing down their business in New Zealand. 

Is Closing Down Your Business the Best Option? 

Before you close down your business, you should weigh all your options and seek advice from a professional. Some of the key steps to make your decision include: 

  • gathering your financial documents and assessing your current position;
  • getting advice from a professional such as your accountant or business mentor; 
  • if you are having difficulty repaying your debts, discussing repayment plans with your creditors and Inland Revenue early on in the process – do not leave it until the last minute; and 
  • considering other alternatives, such as changing your business model or seeking funding from investors or banks. 

How to Close Down Your Business as a Sole Trader 

If you want to stop operating as a sole trader, you should notify your accountant and Inland Revenue, and file your final tax return. You cannot file before the end of the year, even if you ceased your business operations midway through the year.

If you have registered for GST, you will have to file your remaining returns and cancel your registration. If you have employees, you will need to pay any employment-related taxes and income tax before deregistering as an employer with Inland Revenue. 

How to Leave or Close Down Your Partnership Business

Before you leave or dissolve your partnership, you should discuss the rules for leaving a partnership with your accountant or Inland Revenue. You need to ensure you meet all your tax obligations. These obligations include filing the partnership’s final income tax return and your individual return showing your share of the partnership income or loss.

You will also have to file your remaining GST returns and cancel your registration. If you employ staff, you will need to pay any employment-related taxes and income tax before deregistering as an employer with Inland Revenue. 

How to Close Down a Company

To close down your company, you need to apply to the Companies Office by passing through a special shareholders resolution or by any other means agreed in the company’s constitution. You will have to meet your legal and tax obligations under New Zealand law. These include: 

  • update your information and file all your company documents with the Companies Register;
  • file your final tax return with Inland Revenue and notify them of the closure;
  • file your remaining GST returns and cancel your registration;
  • pay any employment-related taxes and income tax before deregistering as an employer with Inland Revenue; 
  • if you have shareholders, discuss any tax implications with your accountant; and 
  • request a confirmation that Inland Revenue has no objections. 

Before closing down your company, you have to cease all your operations, pay the company’s debts and liabilities, and distribute all of its assets. You also need to check that there are no creditors who have taken steps to put your company into liquidation. Make sure you keep your business records for seven years after you remove your company from the Register.

If your company is merging or is being taken over by another company, the process you will follow depends on the circumstances of the companies that are merging. Check the Companies Office website for more details.

Key Takeaways 

If you have decided to close down your business, you will have to follow a series of steps to ensure you meet all your legal and tax obligations. For example, you need to:

  • file your final tax returns with Inland Revenue and notify them of the closure;
  • if you have registered for GST, you will have to file your remaining returns and cancel your registration; and
  • if you employ staff, you will need to pay any employment-related taxes and income tax before deregistering as an employer with Inland Revenue. 

There are other obligations that are specific to your legal business structure. For example, if you are closing down a company, you need to file all your company documents with the Companies Register. 

If you need help to understand your legal and tax obligations when closing down your business, LegalVision’s corporate lawyers can help. Call 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Should I close down my business?

Before you close down your business, you should weigh all your options and seek advice from a professional. Some of the key factors you should include in your decision are your: financial position; ability to repay your debts, including your creditors’ position; and whether you can pursue other alternatives, such as changing your business model or seeking funding from investors or banks.

How to close down my business as a sole trader?

If you are operating as a sole trader, you need to meet your tax obligations before closing down your business. These obligations include notifying Inland Revenue and filing your final tax return. If you have registered for GST as an employer, you will have to file your final returns and cancel your registration.

How to leave or dissolve a partnership?

Before you leave or dissolve your partnership, you should discuss the rules for leaving a partnership with your accountant or Inland Revenue. You need to file the partnership’s final income tax return and your individual return showing your share of the partnership’s income or loss. If you have registered for GST as an employer, you will have to file your final returns and cancel your registration.

How to close down my company?

To close down your company, you need to apply to the Companies Office. You need to have ceased all your operations, paid all business debts and liabilities, and distributed all business assets. You have obligations with both the Companies Register and Inland Revenue, such as updating your information and filing your final tax returns. If you have shareholders, you should discuss any tax implications with your accountant. You also need to check that there are no creditors who have taken steps to put your company into liquidation.

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