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Things to consider when closing down your business

If you’ve decided to close down your business rather than selling it or passing it down to the next generation, here are some things you should consider doing.

4 minute read

Once you’re sure that closing down is the way forward, get advice from your bank, lawyer, and accountant as early as possible to confirm what your next steps may be. Below is a short list of things to consider. 

Set a date

At some stage you will need to set a date for ceasing to trade. Take into account any on-going revenue commitments such as the end of a contract or job which you may want to complete. Then look at any contractual obligations you’d like to exit.

If you have a lease on your business premises that extends past your closing date, you’ll need to check what your lease agreement allows. An ideal outcome could be for another business to take over the lease so this cost ceases once you’ve stopped operating. This could be the trigger point for a closing down date; when you’ve found someone to take that obligation off you. Remember the landlord will usually need to agree to assign the lease to someone new.

Communicate your intentions to close

There will be a number of people and organisations you need to inform of your decision to close. If you have staff, make sure you’re complying with all employment legislation requirements and seek advice from lawyers and employment experts. Communicate your decision with your staff, remembering that this will be a big impact on their lives, so you may wish to communicate this change as soon as possible so they can plan for their future.

Notify suppliers & customers

Inform your suppliers and customers about your closure. You may wish to tell long-standing customers in person before placing an announcement on your website, social media, or sending an email to all your customers and suppliers.

Sell assets and pay debts

You could start selling the assets your business doesn’t need before closing, such as excess stock and equipment you rarely use. Once you’ve ceased trading, sell remaining assets such as computer equipment, office furniture, and vehicles. If possible, find buyers for these items before you close.

It’s then time to pay any outstanding debts which could include:

• final rent payments
• utility bills (power, phone, internet)
• council rates, insurance
• outstanding invoices from suppliers.

Cancel on-going agreements

There will be a number of contracts, services, direct debits, or subscriptions that you’ve signed up for that should be stopped, some which may require advance notice. Examples include:

• software subscriptions
• leases (commercial and vehicles)
• service contracts
• utilities (power, internet, gas, phone)
• insurance
• hire purchase or financing.

Check if there are any penalty clauses for breaking an agreement early and if you need to, seek legal advice.

File final taxes

Completing your final tax returns and paperwork will vary depending on the structure of your business, as sole traders, partnerships, and companies have slightly different rules so you should discuss this with your accountant. Inland Revenue also has a handy video that helps explain their process.

Steps to take for all businesses

Regardless of your business legal structure, you’ll most likely need to:

• file your last GST return and cancel your GST registration
• pay employees their last pay and de-register as an employer
• pay final employer-related taxes (PAYE etc)
• file your final tax return.

Failure to close your business properly could result in penalties, a tax audit, or even legal action, so it’s essential to check you’ve done everything properly.

If you have a company you want to de-register, once Inland Revenue is satisfied everything is in order, they will supply you with a letter confirming they have no objection to removing your company from the Companies Register. They will want to know that:

• the company is no longer in business
• all your business debts are paid
• the company has distributed its assets
• there are no creditors
• you’ve given notice to any parties with a registered financing statement.

Your accountant will be able to help you if you’re unsure. Also check the Inland Revenue page on closing down a company, and the Companies Office page on how to remove a company from the Companies Register.

Finalise the closing down process

Contact your bank to decide when to close your business accounts and any business credit cards or other services that need to be terminated, and close any business accounts you may have left open.

You’ll also need to store your business records, tax returns, and other evidence for at least seven years in case Inland Revenue decide to audit your business. Keep them in a safe place.

Closing down your business is never an easy decision but making a plan and sticking to it will help things go smoothly, allowing you to move forward with your new plans, worry-free.

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This content is for general information purposes only and does not constitute, and is not intended as, personalised financial, legal or tax advice. BNZ recommends that you seek advice specific to your personal financial, legal or tax situation from a qualified adviser. Neither BNZ nor any person involved in the content accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.