Just like the procedure of starting the business in India is long and tedious the process of closing down the business is also not so easy. To close your business legally in India there is a complete step by step procedure that must be followed by every person. Through this article we will understand how to close down the business legally in India.
Just put a lock on your registered business office and your business is closed! Do you really think closing down the business in India is this easy? No it is actually not. The decision of closing down the business in India is in itself very daunting and hard. Further, for actually closing down the business legally there are certain mandatory steps that are required to be taken. Closing down a business in India is a multi-step procedure based on the type of startup structure like the private limited company, partnership firm and limited liability partnership etc. Through the course of this article we will take a look at the procedure of closing down the business legally in India.
- Take a firm decision to close your business- First of all a firm decision must be taken by all the partners and shareholders to actually close the company. A resolution for taking this decision must be passed by the partners in case of partnership firm and the members in case in company.
- Obtaining Tax clearance- When you are closing down the company legally it is important for you to ensure that the indirect and direct taxes have been paid completely. Further, it should be proved that the various returns have been filed by the business and the assessment of the taxes is complete or is in process or will not lead to non-compliance.
- Surrender of licenses and approvals-In order to operate the business the various licenses and the approvals may be obtained by the startup. At the time of closing down business the startups must ensure to intimate all the authorities from whom such licenses are obtained. Further all of these approvals and the licenses must be surrendered by the applicant.
- Settle the claims of employees- All the employees of the company are required to be settled for their pay. They should be paid after taking in account the end of services and shall be paid the amount including the leave encashment and gratuity.
- Paying the dues of creditors- Each and every amount due to the creditors and lenders must be negotiated and settled before closing down the company. In case there is a lack of resources to settle the claims the startups may be required prove the bankruptcy or the insolvency.
- Closing down the accounts- All the accounts of the company must be closed and if any surplus should be distributed among the members. Further, the steps must be taken to close down the bank accounts of the company after making all the payment and receipts.
- Filing the application for closing down the company – An legal application is required to be made to the authority in order to get the company marked as the deactivated or struck off. There is a complete step by step procedure this procedure that must be followed. There are distinct procedures of closing down different kind of business structures. In this procedure the approval of all the partners, members and creditors must be obtained and submitted with the ROC. Further, all the assets and liabilities of the business must also be extinguished.
- Keeping the records- After the legally close down of business all the record pertaining to company closure must be retained by the founders ofcompany.
To legally close down the business in India basically it is required to go through the procedure that ensures that no party is aggrieved by the decision of business closure and there not any non-compliance on the part of company.