Overview of exiting

Exiting a business is inevitable, so it’s really worth considering how you can best manage the process of your exit or succession.

On this page:

• Handing over business
• Selling your business
• Voluntary closure
• Managing involuntary closure

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Handing over business

Preparation

You need to transfer as much of your operating knowledge of the business over to the person taking charge and that can take time, so you need to start your succession planning early.

If the next generation aren’t ready to take the reins, you might also want to consider placing the company in a trust with trustees who can hold and manage it until your beneficiaries are ready.

Find out more about trusts with Understanding business structures.

Gifting assets and shares

There is no form of capital gains tax or gift duty that applies to the gifting of business assets or company shares in New Zealand.

Sole traders (gifting assets)

If you’re a sole trader with assets, you can gift them as you see fit. You just have to make sure any appropriate agencies or regulatory authorities (such as the NZTA if the asset is a vehicle) and any providers insuring the asset are informed of the change of ownership.

However, you may want to consider trade marking your business brand or logo with the  Intellectual Property Office of New Zealand ( IPONZ). A trade mark can offer your successor a greater degree of control and protection over the business they’re inheriting, even though it doesn’t exist as a separate legal entity, and provide them with a valuable asset to sell when it comes to their time to move on.

Find out more with What is a trade mark?

If you’re a partner in a partnership, you can gift your share of the business’s assets, but only once the partnership has been dissolved. Your successor will then have to sign a new deed of partnership to start a new arrangement with your former partners.

Find out more with our Focus on partnerships.

Shareholders (gifting shares)

If you want to gift shares in a company, use your company authority to update the shareholder details with the Companies Office or ask a director with company authority to do so on your behalf.

The following shareholder details will need to be updated or confirmed.

• The full legal name of the shareholder.
• The shareholder’s address.
• The total number of company shares owned.

Find out more about Succession planning.

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Selling your business

Sole traders (selling assets and goodwill)

Selling the assets of a business can have GST implications, depending on whether both the buyer and seller are GST registered, and whether the assets being sold allow for a new business to be run independently. Consult an accountant on the GST implications of an asset sale before it is completed.

Goodwill is the value of your business’s existing relationship with its customers that you’ve built up through your own hard work. As the value of goodwill is subjective, it is classed as an intangible asset that isn’t subject to GST or any other tax.

Find out about GST with An introduction to GST and GST obligations.

Shareholders (selling shares)

When selling shares, it is your responsibility to use your company authority to update the shareholder details with the Companies Office or ask a director with company authority to do so on your behalf.

The following shareholder details will need to be updated or confirmed.

• The full name of the shareholder.
• The shareholder’s address.
• The total number of company shares owned.

If you hold all the shares in your company, you may want to sell the business as a going concern. Preparation is the key to doing this successfully.

Find out more with about Getting your business ready for sale, How much is your business worth?, and Who will buy your business?.

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Voluntary closure

All businesses, regardless of their structure, must file a final tax return after they have ceased to trade. The final tax return should contain your business’s accounts up to the date it ceased trading, and then be filed after the end of the financial year when you would usually file an annual tax return.

You must then keep your business’s records on file for a minimum of seven years.

Find out more with  Inland Revenue.

Companies, however, must also do the following.

• Apply to the Companies Office to be removed from the companies registry.
• Confirm with Inland Revenue that there are no objections to the company’s removal from the companies register due to any tax implications.

You may also have to:

• De-register as an employer with Inland Revenue.
• Cancel your GST registration with Inland Revenue.

Find out more about Closing down voluntarily.

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Managing involuntary closure

If it comes to your business closing down because it is unable to pay its debts, you still have some options.

Depending on your personal liability, you may want to apply for a bankruptcy order or elect to put your company into voluntary administration to give it some breathing space from its creditors.

Find out about Managing involuntary closure, Preventing involuntary closure and Improving your business health.

Try the 10 step survival plan for advice on returning your business to profitability.