How to close a Sole Proprietorship or Partnership
The law does not separate the assets and debts of the Sole Proprietorship or a Partnership from the assets and debt of the business.
A Sole Proprietorship or Partnership stops existing when the trader or proprietor stops carrying on the business. If he or she sells the business, the person who buys it will start their own new sole proprietorship.
In a partnership all the partners are liable for the business’s debts and the business is liable for their debts. The partnership ends when:
- The partners agree that they will no longer do business together as partners, or
- The partners change, or when a partner is declared insolvent by the court.
What is the procedure to close down a CC or Pty?
If a CC or Pty has never traded, or a CC or Pty has no assets or liabilities then you can apply in terms of the Companies Act or The Close Corporations Act to have the entity deregistered.
How to close a co-op
A cooperative is a business owned and controlled equally by the people who use its services or who work at it. The best route to closure is through liquidation. All business, no matter what entity, are registered and deregistered through CIPRO.
You can apply directly to CIPRO to de-register your company or CC which would cost very little. However, it is best to close a CC or a company with the assistance of an accountant and a lawyer, so that it is done correctly and within the law.
CCs and Private Companies are deregistered through CIPRO
You can apply directly to CIPRO to deregister your company or CC which would cost very little. However, it is best to close a CC or a company with the assistance of an accountant and a lawyer, so that it is done correctly and within the law.
If there are assets, or liabilities, or both, then you may have to follow the liquidation route. “Closing a CC or a Pty can be fraught with risks especially if you deregister as you are personally liable for any debt that has been incurred. I suggest that the best thing to do is to liquidate”, recommends director Ian Levitt of Levitt Attorneys.
“There are no fees when you deregister a company or CC, but any interested party or a director, or an auditor of the company, SARS or the Registrar of Companies can deregister a company which can cause an array of problems. Liquidation or sequestration is the best route to take in order to protect yourself.”
Sequestration, liquidation and deregistration
What is sequestration?
If an individual is insolvent and unable to meet his/her financial obligations, a creditor may apply to the court for a Sequestration Order to be granted against the individual. This means that the individual’s assets will be placed under control of a trustee who will consult with the individual’s creditors and convert his/her assets into cash for distribution to the creditors. A sequestration order is effective for 10 years, after which the individual is automatically rehabilitated.
What is liquidation?
Liquidation and deregistration are not the same thing. Liquidation implies that the business is not able to pay its debts. Liquidation further implies that the business will cease to operate (generally as a result of financial problems).
The liquidation may come about as a result of a legal court process, or by the creditors or it may be voluntary liquidation i.e. applied for by members of the CC. In the case of voluntary liquidation a CK6 form is submitted in duplicate together with R40.
Deregistration for VAT
When you close your business you must inform the SARS branch office where you registered, in writing by submitting a VAT123 form.