MYTH BUSTED! Tax and company liquidation.
The legal myth we are busting today relates to taxes. Now, I am not a tax expert, but because I have had clients fall into this trap, I thought I would share this with you. This is one of those examples, where I’m talking about Australia, but I anticipate that other countries are quite similar.
So the tax question relates to when a company is being liquidated. I’ve had some clients who have gone down that route, liquidating their company, and there seems to be a belief that when you liquidate a company, you’re no longer responsible for anything. You liquidate the company, because the company can’t pay its debts, you as the director, or shareholders, you’ve got a get out of jail free card. Now if you’re going through liquidation, I strongly recommend that you talk to liquidation specialists, talk to tax specialists. Don’t talk to me, I can’t help you.
So, what happens with tax? Some tax obligations survive the end of the company. So if you’re the director of a company, you still have to pay tax for the company, even though the company is no longer around. Some taxes not all taxes, this happened to a client of mine who I sent to a liquidation specialist.
My client had been in business with her partner, and was the sole director and both partners were equal shareholders. Now my client thought that all she had to do was shut down the company, and presto, she could just go be happy and she would have no other obligations. Unfortunately for her, she still had to pay some of the company taxes. She had to pay employee benefits, because those attach to the director personally.
Her partner, who by the end of it was her ex partner, because he was not a director didn’t have personal liability, only she did. So, it gets a bit tricky, really the best thing I can say, is get proper advice. Because the last thing you want to do is get it wrong. But just shutting down your company, that is not gonna save you from all of the debts, you may still be liable.
My name is Cathryn Warburton, and I am the legal lioness. I have had a blast busting legal myths to protect your business, so that you can lead the lifestyle that you deserve. If you want to hear more, hop onto legallioness.com.