When an entrepreneur’s situation in life changes, the company’s market conditions turn down and there is no one to continue the business – either in the family, among the employees or outside the company – then the company must be brought to a respectable close, taking care to do it properly.
The company form dictates how this is done in practice. Partnership companies are terminated by notifying the Finnish Patent and Registration Office. Before that, all the company’s debt must be paid off and its stock and possessions must be sold. Then the company’s remaining funds are drawn as private income. Of course, this is taxable income.
Business Advisor Antti Alasaari points out that, when making such a withdrawal, it is important to remember that the difference between withdrawing the funds for oneself at the end of the year or waiting till the beginning of the next may be significant in terms of tax efficiency.
“You also have to consider which tax year you want the depreciation made on the company's immovable property to fall.”
The notification of termination is made using the Y6 form. This form is used to simultaneously notify the Tax Administration’s VAT Register, Prepayment Register and Employer Register of the termination. After the notification has been registered, the company’s data will be removed from the Trade Register. After that, the business owner no longer has the right to use the business name, which will become free for someone else to use.
Or should your company remain dormant?
A limited liability company is shut down by filling in a notification form for termination, which can be found on the website of the Finnish Patent and Registration Office (PRH).
“The termination of a limited liability company is a lengthy process, because you are first required to make a public notice of it in case anyone has any unpaid claims on the company. In other words, the company is placed into liquidation. The limited liability company’s Board of Directors decides how the company’s assets are to be realised and the money is shared between the owners according to their share of ownership,” Alasaari explains.
The termination of a limited company is subject to a charge, and the cost of several hundreds of euros causes an enormous number of companies to remain simply dormant and to exist only in name.
“It must be remembered that in this case the duty to notify, for example, the Trade Register remains with the entrepreneur. Just last year the Finnish Patent and Registration Office cleared out companies from the Trade Register that have not made a notification to it in ten years.”
“There are other issues to consider too. If it turns out that a person applying for unemployment benefit owns an enterprise, even one that has done no business for some time, there may be problems with the application. Of course, one benefit of not terminating an enterprise is that it is easy to continue the business if you decide you want to after all,” Alasaari continues.
A private trader can shut down their business free of charge using the above-mentioned Y6 form.
What if you could find someone to take over after all?
Entrepreneurship is not always a life-long career and there is nothing to stop you from closing your business even if it is profitable. Nevertheless, Alasaari and his colleagues want to encourage entrepreneurs looking to close down to try and find someone to take over.
“Many people interested in starting a business would prefer to start their entrepreneurial career by running an existing business. Why should you always have to start from scratch? You can put your business up for sale in the Ostrobothnian Yrityspörssi, and we at VASEK and Enterprise Agency Startia are also happy to help you find a buyer. We don’t like to see a viable enterprise terminated without even trying to find a new owner for it.”
To read more go to:
Talousapu.fi - Yrityksen lopettaminen (in Finnish)