Understand your obligations
The way you go about closing your business will depend on factors such as your business structure, GST registration, and whether you have employees. Key actions include:
- Filing final tax returns and deregistering with Inland Revenue. You’ll need to submit all outstanding returns up to your last trading day and deregister from GST to avoid filing nil returns.
- Settling all outstanding debts and obligations.
- Informing stakeholders, including employees, creditors, and suppliers.
If you’re owed money, collect payments before announcing your closure. Once people know the business is shutting down, debtors may be less inclined to pay.
Because each situation of closure is different, it’s advisable to consult an accountant, lawyer, or business advisor. They can explain your tax obligations and guide you through the legal requirements for closing a business, and help avoid costly oversights.
Closing a company
If you’re shutting down a business that operates as a registered company, there are formal steps to follow:
- Notify Inland Revenue and file all outstanding tax returns up to your final trading day.
- Submit GST returns and use the IRD website to deregister from GST.
- Clear all liabilities, including supplier invoices, loans, leases, rental agreements, and employee entitlements.
- Before deregistering, liquidate company assets and address the tax implications of any shareholder distributions.
- Once trading has ceased and debts are settled, apply to the Companies Register to be removed. Inland Revenue clearance will be required before removal is approved.
These actions form the business structure and closure process for companies, giving you a clear path to winding up a business.
Sole traders
If you’re operating as a sole trader, the process for shutting down a business is more straightforward, but you still have responsibilities:
- File your income tax return for the financial year, even if you stopped trading mid-year.
- File all GST returns up to your closure date, then deregister.
- Notify your accountant or advisor so they can confirm your final tax obligations.
While there are fewer steps, completing them thoroughly is key to finalising the business closure process properly.
Leaving a partnership
Closing or exiting a business partnership involves additional steps compared to sole traders. You’ll need to:
- File the partnership’s final income tax return.
- Report your share of the partnership’s income or loss on your personal tax return.
- Address GST and employment obligations if the partnership was registered.
- Distribute jointly owned assets or proceeds in line with the deed of partnership.
If you are leaving but the partnership will continue, seek advice to understand the tax and legal implications of your exit.
General tips for closing any business
No matter the structure, there are practical steps that apply to all types of business closure:
- Resolve any disputes or outstanding issues that could delay closure.
- Repair or sell business assets, and make sure accounts are current.
- Notify suppliers, creditors, and clients to maintain transparency.
- If you have employees, follow all legal requirements for termination, including final pay.
- Cancel licences, permits, and memberships tied to the business.
- Terminate subscriptions, utilities, and other ongoing services.
These actions help safeguard professional relationships while wrapping up obligations responsibly.
Making the transition smoother
The process of winding up a business can be both practical and emotional, but preparing early will make it easier. Consider working with your advisor to create a checklist of everything that must be completed. Submitting all returns on time and paying any outstanding taxes helps avoid penalties, while keeping stakeholders informed protects your reputation and maintains goodwill for the future.
Retention of records
Even after closing a company, you are legally required to keep your records for at least seven years. This includes financial statements, tax filings, employee records, and correspondence related to business operations. Keeping accurate records gives you protection if Inland Revenue or another agency requests information after your business has ceased trading.
For example, if you sold equipment before liquidating a business, you may need to show invoices and tax documents related to that transaction several years later. By holding on to records, you’ll be able to provide proof of compliance and avoid complications. A clear filing system, whether digital or physical, makes it easier to store and access this information when needed.
Help and resources
- Closing your business from Business.govt.nz.
- Closing down from Inland Revenue.
- Closing a company from the Companies Office.
Next steps
- Decide whether you’re liquidating a business or closing it through voluntary removal.
- File final tax returns and deregister with Inland Revenue.
- Pay outstanding debts and obligations, including employee entitlements.
- Liquidate company assets or distribute partnership/sole trader assets appropriately.
- Retain all records for seven years.
- Communicate with stakeholders and close accounts, licences, and services.
