Termination of the company

Many have inquired about closing down a company. It's understandable that an entrepreneur is interested in knowing how to end business operations and what aspects are involved – whether out of immediate need or just gathering information for the future. BerFin does not offer this service, but here we share everything important to know.

We will address this topic in two parts: first, the liquidation of a company, i.e., the complete termination of business activities, and secondly, the temporary suspension of a company's operations.

Closing a Company

If the company's financial condition is good and all obligations can be covered by assets, it is possible to voluntarily liquidate the company. In this case, the decision to close must be submitted to the Business Register, information published in official publications, accounting records organized, and a final balance sheet prepared. The company's assets are sold off, debts collected, and obligations liquidated. Then the remaining assets are distributed among the shareholders. Owners can receive their equity tax-free, and income tax must be paid on the remaining profit, as with dividends.

Voluntary closing of a company is only possible if the majority of shareholders are in favor. More detailed guidance can be found in the eesti.ee article "Voluntary Closing of a Private Limited Company".

As a legal entity, a company has independent rights and obligations from the moment of registration in the Business Register until its removal from there.

Closure of a company can also occur forcibly, for example, if the company does not meet requirements. In such cases, the court is involved in the process. A company that does not have enough assets to cover its obligations must start bankruptcy proceedings. Bankruptcy is a serious matter and leaves a personal negative mark on the company's owners.

Every company's liquidation ends with its removal from the Business Register.

Suspending a Company's Operations

Sometimes it is more sensible to temporarily suspend a company's operations. For example, when significant changes occur in an entrepreneur's life – the birth of a child, a career change, marriage, moving, etc. – and there is no time or resources to manage the company. If there is a desire to continue operations in the future, it is prudent to suspend them temporarily.

Some tips for suspending operations:

• Deregister from the VAT payer's register to reduce bureaucracy. This way, you don't have to submit tax declarations every month.
• Do not forget to submit the annual report. The annual report must be submitted even if there was no activity.

Beyond the above options, it's also possible to sell your company. If you think your company is profitable and valuable enough, it might be a good idea to assess its value. Selling a firm can be more profitable for the owners than liquidation and profit distribution. For some, their company has sentimental value, and in such cases, selling can be a more pleasant option than liquidation, as the company sort of continues to live.

Good luck with using it!