6. Finalise after sale closure
So now the business is sold or closed that brings us to the end of our journey. But don’t forget that there are several things you’ll still need to attend to. Rosanne, what needs to happen when shares in a company have been sold with the business?
Scott, we need to be notified within 28 days so that we can update the company register with any changes to the shareholders and directors. This allows the public to search the register and to see those new details.
And if you want to close down a company?
There are generally two ways you can close a company, voluntary deregistration or winding up. Now, voluntary deregistration is straight forward if the company has no assets or liabilities. However if the company is solvent, has assets and liabilities, then an orderly winding up of the company’s affairs is required.
This will include paying all debts, appointing a liquidator to sell the assets, ceasing operations and distributing the remaining assets amongst the shareholders.
What does a company that is being closed down need to do with its business name?
Well, the business name can either be cancelled or transferred to the new owner we talked about earlier.
Thanks Rosanne. It can all seem a bit complex for a small business owner to get their head around.
Well I agree Scott, especially for first timers. So we’ve tried to make it as easy and straightforward as possible for small business by including some useful information on our websiteExternal Link. We also have lots of user guides and we’ve just recently published some new videos and tutorials on YouTube which will demonstrate how easy it is to transfer or cancel a business name.
That’s excellent news. I look forward to checking out the resources available on the ASIC website and YouTube. Thanks Rosanne.
Doron, we’ve just been considering issues around closing a company. If the business is a partnership, how do you go about closing it once the business has been sold or closed?
Generally this is an automatic outcome of the termination of the business activity, subject to the terms and conditions of the partnership agreement. Where there is no formal partnership agreement then it’ll be determined by the partnership legislation of the relevant state or territory.
Ok thanks Doron. Now onto tax. Kelly, what final tax obligations are there after a business has been sold or closed down?
Well Scott, first off all, there are a number of tax issues that business owners need to finalise for their employees. These include:
- sending to the ATO any tax deducted from payments to employees, which we talked about earlier. This includes pay as you go or PAYG withholding amounts, and issuing payment summaries to employees
- ensuring super guarantee payments are up to date depending on their agreement with the new owner, and
- finalising fringe benefits tax or FBT obligations where applicable, including lodging their final FBT return.
To assist small businesses with these obligations, we have a checklist on the ATO website.
And what about activity statements and tax returns? What needs to be done here?
After the sale, the business may need to report GST (goods and services tax) adjustments in their activity statement. They may also need to account for any business losses or capital gains or losses in their tax return.
For many businesses, you’ll lodge a final activity statement and a tax return for the business, and we encourage you to do this early, you don’t need to wait until the end of the reporting period, unless you were operating as a sole trader. Sole traders may lodge their activity statements once the business activity is finalised, but as you may earn income from other sources, you wouldn’t lodge your income tax return until the end of financial year.
You may also have some ongoing pay as you go reporting obligations, as these obligations are determined from your previous return. You can choose to vary your rate to zero if you have no further instalment income to report, which may be the case if your only instalment income was from the business that you’ve now just closed or sold.
And how about their registrations, such as ABN (Australian business number) and GST?
Yes, you need to let us know when you’ve ceased to run the business and we can then cancel your ABN or other business tax roles. You can do this online, by phoning or lodging a form. We encourage you to do it online via the Australian business registerExternal Link. We have an overview on our website.
It’s worth noting that when you cancel your ABN, we’ll automatically cancel your AUSKey, so it’s a good idea to make sure you’ve met all your lodgement, reporting and payment obligations with the government agencies you deal with first.
Thanks Kelly. Now don’t forget that there are still several things that need to be attended to. These include:
- business names, licenses, leases, utilities. If these haven’t been transferred to new owners then these will need to be cancelled, and also
- don't forget employer sponsored super accounts may need to be closed.
And when that’s all done, hopefully you can take that well-earned vacation.