If you're moving forward with the closure of your Proprietorship company and want to know if you need to Inform ITR about the Closure of the Company.
Closure of a Proprietorship company is the process by which a proprietor ceases to be an owner of the business. India has more than 60% of proprietorship businesses that do not succeed and have to be closed down due to one reason or the other.
If you want to close a proprietorship business you must inform the proper government authorities about it. Read on to know if you have to Inform ITR about Closure of Company.
Reasons for Closure of Proprietorship company
Proprietorships are not usually registered like a company under the Companies Registration Act. A proprietorship is owned by a sole proprietorship business and it can be closed easily by the decision of that single owner. If you want to go through the closing of your Proprietorship you can contact Vakilsearch. Our team of legal Experts will help you with the process and save you from all the legal complications.
Some common reasons for the closure of a proprietorship company can be as follows.
Bankruptcy or Death of the Sole Proprietorship Company
If a business is declared bankrupt it cannot be transferred to any other person nor can it pay off any debts that it has taken. In such cases, the company is closed off and the decision is made by the proprietor.
If the owner of the proprietorship business dies when the business cannot be transferred to someone else and in such cases, it has to be closed down without much delay.
If the business services that the proprietorship is conducting are considered illegal or unethical, it gets legal notice and in such cases, the business cannot be run further. In this case, the business has to be closed down.
As you know that in a proprietor business only one person is the owner of the business and they have to make all the investments and bear all the losses as well. In such cases, it becomes difficult to find investment and resources to continue a business. If the business is not working well it has to be closed down due to a lack of proper funding and resources.
Dissolution of Business
In case the owner of the property business does not see any future growth or is not getting the returns that he/she expected, they can shut the business down completely on advice from a legal expert.
These reasons are enough for a proprietorship to close down. It is important to go through the entire process legally so that there are no future complications.
Do you aware of All You Need To Know About Sole Proprietorship
Steps to Close a Proprietorship Company
Once the owner of the business has decided to close down the business they must understand the steps that they have to take to legally dissolve their properties should the business be. Proper Legal procedures should be done such as to Inform ITR about Closure of Company and documents should be prepared.
We’ve mentioned below some important points that must be considered while closing a Proprietorship business.
Cancel GST Registration
It is important to cancel GST registration before the closing of the properties should business to avoid any fines or fees later on.
If the proprietor has any license in the name of the business, the termination process of the license should be started before the business is brought down. This is important in order to avoid any renewals, return filing formalities, or other such consequences.
Shop and Establishment Registration
Before closing the business make sure to cancel the shop and establishment registration. The shop and establishment registration is granted by the labor department of the state and it needs to be renewed every year with a specified fee. So the cancellation should be done in order to avoid non-compliance and Renewal fees.
Surrender Trade License
The trade license is granted by the Local municipal corporation and it is necessary to get it renewed before the 31st of March every year with a certain amount of renewal fee. Therefore, it is advisable that before closing the business, the proprietor moves the request to cancel the trade license in the concerned municipal corporation.
Surrender TAN number
It is not necessary to Inform ITR about Closure of Company. However, you have to give up the TAN number allotted to the proprietorship. An application is supposed to be submitted for its cancellation.
Termination of All Agreements
If the business has entered any sort of agreement with other companies or individuals it has to be terminated. These agreements should be terminated as soon as possible to avoid any legal consequences and financial liabilities.
Close the Business Bank Account
The bank account that is started with the name of the business has to be closed down and the unused cheque has to be returned. An application will be submitted to the banker for the process of closing the bank account to start.
Surrender the Trademark
The trademark that has been registered by the company has to be surrendered. An application will be submitted for the same to the registry of the Trademark office.
Inform your Stakeholders
All the stakeholders of the company must be informed before the closure of the company via email call, text, etc. It is important to inform all the stakeholders so that the name of the company cannot be misused in the future.
There can be multiple reasons for the closure of a proprietorship business. If this process has to take place the owner must know the legal procedures and compulsions. It is important to go through this process step by step to avoid any errors or mistakes.
It is not compulsory to inform ITR about closure of Company but the tan number has to be surrendered. The multiple other legal procedures that an owner has to go through for the closure of the company.
If you need help in any legal procedures while closing the properties of a business you can contact Vakilsearch. The team of legal experts will guide you through the entire process so that you don’t face any difficulties.
Did you know?
Sometimes, in the case of liabilities, the proprietorship owner has to pay them personally after the closure of the business.
Must Read Topics:
- What Are The Documents Required For Registering A Sole Proprietorship in Gurugram?
- What Registrations Does a Sole Proprietorship Need?