On this page
- Steps to close a business
- How to communicate the closure
- Support during and after the closure
- Applying for bankruptcy or liquidation
Steps to close a business
You will need to:
- visit the Australian Securities and Investments Commission (ASIC) website to cancel your business name, or to deregister your company
- make sure you've completed all your online transactions at the Tax Office website and the Australian Business Register website before you cancel your tax registrations e.g. cancelling your ABN
- make sure all your personal expenses are recorded separately from your business expenses
- if you're leasing the premises, know your obligations if you close before the end of your lease. For all leasing questions, ring the Victorian Small Business Commission on 13 22 15
- if your business is in severe financial difficulty, speak with your accountant or lawyer about paying creditors by declaring yourself bankrupt or liquidating your business assets.
Deal with staff
If you're making staff redundant there are support services available to help them retrain and find new work. Visit the Jobs Victoria Workers in Transition page for further details.
After your business has closed down you may still have obligations to your employees. PAYG, Fringe Benefits Tax, superannuation and Eligible Termination Payment final payments often need to be made even after the doors have closed.
Your employer responsibilities will differ depending on whether a worker is an employee or independent contractor. For detailed instructions on calculating all final payments for employees and independent contractors, use information from the the ATO's When a worker leaves page.
Communicate the closure
- organise meetings with people who will be immediately affected by closing the business e.g. business partners, bank managers, guarantors, suppliers and key customers or clients
- if you're closing a service business, it may be worthwhile speaking to your competitors with the aim of on-selling your client base, or arranging ongoing support for key clients.
Support during and after the closure
Closing a business isn't an easy thing to do. Consider one or more of the following resources:
- go to the Small Business Mentoring Service to investigate working with a mentor who can guide you through the closing of your business
- get assistance with retirement, re-employment and illness support services with Centrelink or the Department of Social Services
- it's worth considering some ongoing, professional grief counselling. Ask your doctor about a local counsellor or phone service, or contact GriefLine for situations of extreme stress, anxiety or depression
- go to beyondblue or ring their infoline on 1300 224 636. For urgent crisis counselling, ring Lifeline on 13 11 14.
Bankruptcy and liquidation
For businesses in financial difficulty the last step in paying off creditors and dealing with debt is sometimes a declaration of bankruptcy or liquidation of business assets. The main difference between bankruptcy and liquidation is that a bankrupt is usually an individual or sole trader, and liquidation generally applies to a company in receivership.
Applying to become a bankrupt
The process begins by looking at how the individual's assets can be sold and the proceeds distributed to pay debts. If there are not sufficient assets to cover all debts to creditors, a split will be made on a percentage basis. Bankruptcy can be initiated by either a creditor or an individual debtor.
Becoming a bankrupt is not automatic. You or your professional adviser must apply formally to the Australian Financial Security Authority (AFSA), the government body responsible for the administration of bankruptcy and insolvency in Australia. It's a good idea to follow the steps below.
- read AFSA's Prescribed Bankruptcy Information guide: you'll need a signed acknowledgement you've done this as part of your application
- download AFSA forms to be completed, such as the debtor's petition
- if you're a company read the Insolvency Information Sheets from the Australian Securities and Investments Commission website
- inform the Australian Tax Office (ATO) when you have ceased trading
- seek advice from an accountant or lawyer experienced in bankruptcy and insolvency matters
Liquidation can happen to a company when its creditors (the main people the company owes money to) pass a vote to have the company liquidated. This follows a period when the company has been put into the hands of an administrator in an attempt to salvage the financial situation of the business. If one of the creditors applies to wind up the company, a liquidator can be appointed to manage the creditors' interests and deregister the company.
The liquidator has a responsibility to all creditors, not just those who applied to wind up the company. The liquidator's basic duties are:
- collecting and selling the company's assets
- investigating and reporting to creditors the reasons for company failure
- determining liquidation costs and the order of payment
- reporting to appropriate authorities and applying for deregistration of the company.
Where there are not enough funds to pay all creditors, payment is usually divided proportionally among them, and in the order described above. Capital is only returned to shareholders if there are surplus funds. In all cases, the costs of the liquidator are met first.
It is the liquidator's job to get as much money as possible from the company, including suing any company directors through a creditor, if it can be shown they were trading when the company was insolvent (unable to pay its debts on time).