Instead of continuing to struggle with a failing company, often it is worthwhile to consider liquidating and cutting your losses instead of maintaining a financial drain. Voluntary liquidation isn’t about losing a business, because you haven’t. Simply, you have closed a company that wasn’t working, and you have done it in a way that keeps the door open for when you want to start another one. The following are some of the reasons why it is beneficial to liquidate your own company before it is too late:
To Avoid a Director Penalty Notice
If you do not recognize the best time to liquidate your business, you could run into problems with the Australian Taxation Office (ATO). If you try to continue steering a sinking ship, the ATO will one day serve you and your company with a director penalty notice, or a garnishee notice, which will then make you personally liable for the company’s taxes. If you simply abandon the company without liquidating it, then you are at risk of not receiving the legal notices, which will also make you responsible for any of the company’s ATO debt. If you choose to liquidate your company voluntarily, then any tax liabilities that the company had will be written off.
To Avoid Confrontation with Creditors If your company simply ceases to continue with business as usual without any formal liquidation, then any outstanding creditors will have the ability to pursue you and your company for payment. This can come in either the form of harassment or legal notices – both of which you will want to avoid. The only way you can avoid this is by liquidating, because after you have done that, then your company’s creditors cannot take any further action against you.
To Avoid a Conduct Report
If, by chance, you fail to liquidate your company on time, then eventually you will be subject to compulsory liquidation. In this situation, an Official Receiver (OR) will be forced to liquidate the company for you, and he or she will investigate the activities of you and your company from the previous two years: this is known as a conduct report. Through the investigation, you could be made personally responsible for the debts of the company if the OR finds any of the following: you knowingly traded while the company was insolvent, you took credit without reasonable prospect of repaying debts, or if you failed to submit accounts. If your company is suffering, then it is definitely in your best interest to cut your losses and move on.
To Get a Fresh Start
The stress of struggling financially with a failing business is just not worthwhile when you have the option of liquidating. Often it is more beneficial for a company that is in debt to liquidate and start again by creating a new company under a different name but with the same customers, clients and suppliers. In some circumstances, this can be ideal for your company as it can breathe new life into the business and give you a fresh start. If you liquidate now, you are under no threat from the ATO, creditors or an OR, and you have a chance to start over. Remember, no company is worth losing your health, relationships, marriage or children over. By acting in the proper manner when it comes to your failing company, you can save yourself a lot of hassle by simply cutting your losses and trying again.