Rising raw material prices, personnel shortages, taxes, crises, retirement... Whatever the reason for your business termination, make sure you follow the right steps. For as simple as starting a business is, termination has a bit more to it.
From the decision to close your business: in this article we will discuss in detail all the steps and points to consider when ending your business. For the termination of a BV, NV or VOF, we have listed the most important points for attention per step.
Reasons why you might want to end a business
Are you approaching retirement age and do not have a successor in sight, are the burdens for you higher than the benefits or are you simply done with entrepreneurship? Once you have made the decision to end your business, it is wise to start the process right away. After all, it takes at least a few weeks before your business actually ends and then you still have 7 years of retention obligations for all administrative matters.
Take comfort in knowing that another 100,000 or so entrepreneurs end their businesses each year. You are not alone, but there are a number of things you need to take care of.
What do you need to do?
Step 1 - deregistration with the Chamber of Commerce
Well, you're done with your business. The first step in the process is to register your business with the Chamber of Commerce. Next, the Chamber of Commerce notifies the IRS of your termination. The settlement from the Tax Office will arrive automatically, such as the final sales tax return. You must keep your records for 7 years for possible audit purposes.
BV, NV or VOF? As a corporation, legal entity or partnership, you must first have this organization dissolved.
Step 2 - Termination of contracts
You will be surprised how many contracts you have entered into over time, and it is important to terminate all these contracts as soon as possible. Actually, all contracts have maturities and notice periods, and sometimes there are additional conditions associated with contract termination, such as a penalty. Therefore, make sure you have a good understanding of what is in all contracts and how to get rid of them. A legal adviser may be able to help you with this. In any case, consider terminating the following current obligations:
- Customers and suppliers
- Rent & lease contracts
- Maintenance contracts
- Purchase contracts
- Insurance
- Permits
- Website and domain contracts
- Business accounts: it is a good idea to download financial statements before you terminate.
Is your company a BV, NV or VOF? Then you often have to deal with current employment contracts for your staff. Business termination is not only emotionally, but also administratively more complicated. You must request a permit from the UWV in time to dismiss staff for economic reasons.
It is good to inform your employees in time. At least six weeks before the date of termination, but it is better to inform them earlier so they have enough time to find another job. Be aware that permanent employees are entitled to transition compensation. Depending on salary and years of service, these fees can be high.
Step 3 - Sale of business assets
Like the number of contracts, you have probably accumulated a lot of company property. And although you own these assets as a director, that relationship changes somewhat when your business ends. If you want to keep your company phone, company car and laptop, you should sell them to yourself for a market price. That way you handle everything nicely and avoid high tax bills.
Step 4 - Tax inventory
You may have applied investment deductions to the business assets you sold in step 3. And you may also have taken advantage of favorable tax arrangements in recent years, which gave you a tax deferral. Once your business is terminated, this benefit expires and you have to repay that tax right away as well. For business assets, it depends on their age and value whether you have to repay the investment deduction for them. If you have little understanding of these regulations yourself, hire a tax expert so that you are not surprised by high costs later.
Step 5 - Calculating the cessation profit
Do you stop your business and is the real value of your business at that time higher than the book value? Then you are making a profit, called cessation profit. This cessation profit is part of your annual income and you have to pay income tax on it. It is wise to get advice in the calculation of this cessation profit, because you can also get a tax deduction on it. And if the cessation profit has a large impact on your annual income - positive or negative - then tax mediation can be interesting for your situation.
Financial support after ending your business
Ending your business can be a long-winded process. The five steps will help you end your business the right way. In some cases, you can apply to the government for benefits. Entrepreneurs over 55 and/or partially disabled can claim IOAZ benefits. And a wider audience of quitting entrepreneurs may be entitled to the financial support of the Besluit Bijstandsvoorziening Zelfstandigen (Bbz). You do need to apply for this Bbz while your business is still up and running. Therefore, prior to closing down your business, take a look at what you will be living on later.
What are the alternatives?
Maybe you want to terminate your business, but there is still enough perspective for a successor. In that case, you might want to consider a business acquisition, which can be done in many different ways. Want to know more? Read our article business succession.
