Things you need to know before closing your business

Closing a business is never easy; it often comes after a lot of thought and tough conversations. But once the decision has been made, it’s just as important to make sure you go about it the right way. 

Learning about business dissolution isn’t just ticking off legal boxes, it’s about protecting yourself, your finances, your reputation and your peace of mind. Today, we’ll dive into how to close a business in Australia, providing insights on all you need to know before, during, and after these difficult times. 

Before closing your business in Australia

Pause before rushing to clear out your office or finalising your decision. Take a moment to consider a few key factors. 

1. Understand your reasons:
Think, why are you choosing to close? Maybe you’ve lost passion, life circumstances have changed, or the numbers just don’t stack up anymore. Whatever your reason, knowing your ‘why’ helps guide your exit plan—and gives you closure too.

2. Check your business viability: 

Is the business still financially viable? To determine the actual viability of your company, consider trying a ‘Business Viability Assessment Tool’ to check your position. Sometimes, it’s worth pausing and reassessing before making the final call.

3. Seek professional advice: 

Different business structures (like sole trader vs. company) have different processes and the right advice from a business lawyer can save you from costly mistakes.

Once you’ve covered these areas, you can consider the formal closure process.

Read about “Answer these 5 important questions before you sell your business.”

1. Formalise the decision and notify all stakeholders

Once you’ve decided to close, it’s time to make it official. At this initial stage, consider: 

1. Formally notifying all stakeholders

Consider holding a meeting with all business owners, partners, and/or directors to formalise the decision. Document everything in writing.

Next, you can consider communicating the closure with your:

• employees and contractors;
• customers;
• suppliers;
• bank managers or guarantors;
• landlords; and
• business partners.

Be clear and respectful. You can notify customers via email, social media, or even a note on your website or storefront. For service-based businesses, consider passing clients on to a trusted competitor for ongoing support.

2. Reviewing finances

Consult your accountant on the financial aspects of your business and consider:

• cancelling unnecessary insurance policies;
• collecting receivables of any outstanding invoices from customers or others; and
• anything else your accountant recommends.

2. Sell or dispose of business assets

Your business has likely accumulated some assets (e.g. stock, equipment, IP, etc.) In this stage, you’ll need to decide what to do with them. You can consider: 

• compiling an inventory and get a valuation;
• transfering, disposing or selling the assets;
• holding a “final sale” to move stock and recover value if your business is an e-commerce store; 
• settling any outstanding loans tied to those assets; and 
• distributing remaining proceeds to owners or shareholders (after debts are cleared).

If you’re leasing property or vehicles, check the lease terms. Some leases include early termination clauses, while others may require payments until the lease ends. If you’re unsure, speak to your lawyer before signing anything. 

3. Fulfil employee entitlements

Letting staff go is one of the hardest parts, but clear communication and fair treatment are key in this process. 

How much notice should I give employees before closing my business? 

Give employees as much notice as possible, and provide official written notice. You can consult legal notice periods by the Fair Work Ombudsman. 

Check the applicable award or enterprise agreement—some require consultation or time off to find new work. 

What should be included in the notice to employees about the closure?

The written notice should be professional, clear, and legally compliant. Consider including things like:

• Key dates – notice issue date, final day, and notice period
• Employee info – name, role, contact for queries
• A reason for the notice – confirm business closure
• Entitlements – final pay, leave, redundancy (if any), super
• Support – references, counselling, or job help + thank-you message

Entitlements and other considerations

• if you’re making 15 or more staff redundant, inform Services Australia; and
• ask your accountant about:
  • notifying the ATO;
  • paying all outstanding wages, accrued leave and redundancy entitlements; and
  • finalising super and fringe benefits tax (if applicable).

4. Settle debts, liabilities and tax obligations

It is important to talk to your accountant about settling all of your debts and tax obligations, including things like: 

• outstanding debts to suppliers, lenders, and contractors;
• tax lodgements (BAS, PAYG, GST, income tax);
• any red flags, like advice that might suggest avoiding tax through “phoenix activity” (That’s illegal and risky), and more.

In case of business liquidation

If your business can’t pay its debts, you may need to go through liquidation. This is a legal process for winding up a company that’s no longer solvent. If this applies to you, get legal advice early. 

For some businesses that go bankrupt, eligible employees may be able to claim unpaid wages through the Australian Government’s Fair Entitlements Guarantee (FEG), though it excludes superannuation and bonuses.

Read about “What do lawyers do in insolvency?”

5. Finalise your legal obligations

As part of your legal obligations, you must also:

Deregister your business: how to deregister a company?

The Australian Securities and Investments Commission (ASIC) manages the company deregistration process. Consider applying for a voluntary deregistration at least two weeks before your annual review fee is due, to help with avoiding extra charges. You can check your review date by searching the ASIC register.

In general, to voluntarily deregister a company with ASIC:

• all shareholders must agree;
• the company must have:
  • ceased trading, 
  • assets under $1,000;
  • no outstanding debts or legal proceedings; and
• all ASIC fees must be paid. 

Once deregistered, a company ceases to exist legally but may be reinstated. To cancel a business name:

1. log in to ASIC Connect;

2. select your business name;

3. choose to cancel it;

4. confirm and submit the request; and

5. wait to receive a confirmation once it has been processed.

If ASIC initiates a company’s deregistration (usually due to inactivity or non-compliance), it will generally notify directors, change the company’s status to ‘SOFF,’ and post a public notice. After two months, the company will generally be officially deregistered unless action is taken.

Close registrations, licenses and accounts

Ensure to cancel any industry licences, local council permits and business bank accounts.

Cancel or “close” your ABN 

When closing your business, you (usually in consultation with your accountant) must cancel your ABN to formally notify the government that your business has ceased operations. 

Before doing so, consult your accountant to ensure all tax lodgments, reports, and payments (e.g. BAS, PAYG, GST refunds, tax debts) are completed. 

Privacy and data compliance

Ensure customer and employee data is handled properly. Delete or archive data securely and comply with privacy regulations. 

6. Final steps 

Keep records 

By law, companies are required to save records as a backup of the process and the information for at least 5-7 years. Consider keeping records relating to:

• sales (including the sale of your business and assets) and purchases;
• payments to employees;
• payments to other businesses;
• deregistration of business; 
• tax records; and 
• tax registrations. 

Take care of yourself 

This one’s just as important. Closing a business can take a toll. Give yourself space to rest, recover and plan your next chapter—whatever that looks like. Other tips include:

• reach out to programs for mental health support for business owners;
• look after your wellbeing with breaks, hobbies and community engagement;
• prioritise manageable tasks and let go of what’s beyond your control; and
• celebrate your achievements and begin setting new goals when you’re ready.

The role of business lawyers when closing a business 

Rushing to close a business can lead to common pitfalls such as unfavourable outcomes, failure to meet legal obligations, or damaging relationships with stakeholders, resulting in confusion and potential disputes. This is where the role of a business lawyer becomes crucial.

Lawyers provide a valuable guide on how to close your business, reducing the risk of future issues. They can help with:

• review and exit lease agreements;
• ensuring contracts are terminated properly;
• guiding you through employee entitlements;
• assisting with liquidation, if needed; and 
• protecting your personal liability as a director.

H+A Legal, your partner in business law

We know how hard it is to say goodbye to a business you’ve built. But we also know how much easier it can be when you have someone in your corner.  

Our team can assist you in navigating through the legal requirements of your business closing down in Australia and ensuring everything is finalised properly, so you can move forward without risk or regret.

Talk to us today about how we can help you close your business professionally and with peace of mind!