Closure of Proprietorship Business
One needs
to follow certain process to close down a business in India as one follows
certain process to start a business. By following due process, while winding up
Proprietorship Business (Firm) you can avoid any future complications which
might arise otherwise. You can either wind up or transfer/sell your Proprietorship
Firm as is considered more appropriate.
We at
FastCorp, can help you close your Sole Proprietorship Firm with the idea of
relieving you from all probable future litigations, disputes and unwarranted
financial cost. Some typical steps to be followed for closure of a
Proprietorship Firm in India are as follows:-
Ø Inform
your employees about proposed closure of business so that they can find another
employment during notice period. In the
absence of agreed employment terms, you are supposed to give 60days notice to
your employees before their termination. Non-service of prior notice may lead
to legal action under the applicable labour laws.
Ø Before
closing down the business, you have to inform your vendors and customers about
proposed shut down so that you can clear your financial account with them. In
the mean time you can proceed with completion of remaining project and contracts
entered into with third parties.
Ø It is
advisable that termination agreements for closing proprietorship firm is
executed with your vendors and customers, clearly specifying therein last date
of your business so that they can make alternate arrangements for sourcing supplies/services
being done by your business. Termination agreement absolves you from
unwarranted future implications regarding your proprietorship firm in India.
Ø Dispose
of all assets (fixed assets and inventories) which are no longer usable later. If
your dispose them through sale then must retain the copies of those bills, and
cancelation documents for tax purposes.
Ø Discharge
your tax liabilities and file applicable forms and returns specified under different
statutes before surrendering registrations under respective statutes.
Ø Terminate
all rental agreements pertaining to Proprietorship Business in order to avoid
future rentals. Also surrender the connections of telephone, electricity, water,
and gas for avoiding future expenses.
Ø Post settlement
of accounts with customers and vendors, close your business’s bank accounts and
also cancel the chequebook and debit or credit card so that it cannot be
misused.
Ø In last, surrender all business registration in India (e.g. GST, PF, ESIC, Shop & Establishment, Professional Tax, Trade License, TDS Account Number etc.) in order to cease any regulatory or other obligations post closure of the business and comply with all associated legal formalities under respective statutes.