Business and Entity Wind Ups - CapitalQ

Business and Entity Wind Ups

Sometimes, a sale is not possible, and sometimes you just need the business and/or entity is gone.

Be it to –

  • Simplify your affairs
  • Reduce costs or
  • Cut ties with historical risk factors

Usually, a wind up can be achieved fairly easily, but there are definitely tricks and traps (and opportunities) to consider.

Just some of the questions that need to be asked include –

  • Are there Retained Profits that will need to come out first (and if so, how do you manage the tax on them)
  • Are there related party loan accounts that must be address (and again if so, how do you manage the tax on them)
  • Are there losses, maybe Capital Losses, that are held within the structure that you would like to use before they are lost forever
  • If the business is a failure (yes, unfortunately, it does happen) how do you make the most of the losses to help reduce current or future tax liabilities?

That’s not to mention deciding what type of wind-up you undertake –

  • If you have a Trust, a vesting needs to be implemented
  • If you have a Company, do you simply “De-Register” which might be the cheapest option, but can actually leave your Company in a Zombie-like state, able to be brought back to life just when you don’t want it to
  • Alternatively there is a Member’s Voluntary Liquidation, yes it will cost more, but it is a final death sentence for the Company, it will never rear its head again, and such a wind up does open up to some tax planning opportunities that may not otherwise have existed.

As you can see, a rushed, or hap-hazard approach to a business or entity wind-up could end up costing you big time in unforeseen taxes and in lost opportunities. It could also mean what you thoughts were gone never to both you again, wasn’t actually gone at all.

So don’t take the decision or the process too lightly, make sure you have an expert advising you every step.

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