Liquidation of Legal Entities and Individual Entrepreneurs

The first step is the preparation of a written statement by the participant of the company, which informs the reason for the termination of business activity. This application is submitted to the authorized body to enter information in the state register that the business entity is at the stage of liquidation.

The second step is to convene a liquidation commission or appoint a liquidator. This is the responsibility of the company’s members. They also set the terms within which the company will be liquidated.

The third step is the media coverage. A note on the liquidation of a legal entity is published in the media. As a rule, this information is submitted in the “State Registration Bulletin”. The note must contain information on the procedure and term for filing claims by creditors.

The fourth step in the liquidation of legal entities of individual entrepreneurs is the calculation of debts to contractors and creditors for mandatory payments to the budget. It is about deductions to such organizations as the Federal Tax Service, Pension Fund, Federal Medical Insurance Fund, Federal Insurance Fund, as well as the repayment of debts to sponsors, investors, creditors and other persons providing funds for the development of your business.

This is one of the key steps that a company’s reputation depends on. If you “write off” debts or avoid non-payment, you can significantly delay the process of liquidation of the business structure.

Once the debt is paid, an interim liquidation balance sheet is prepared. This is done to understand how much money is left in the company’s account. At this stage it is also recommended to take a document from the Pension Fund, which confirms that you have submitted all the necessary information to the territorial body of the Pension Fund.

The fifth step is the dismissal of staff, if any. You need to terminate your employment contracts, pay off your salary arrears, close your current account and destroy your seals. After that, the liquidation commission sends a number of documents to the tax authorities:

• application for state registration of a legal entity related to liquidation. It is prepared in accordance with the form of P16001; liquidation balance sheet approved by the participants. Please be aware that after the moment of publication of the note in mass media about liquidation of a legal entity of an individual entrepreneur till the formation of the liquidation balance sheet it takes at least two months. It is during this period that a field tax audit is conducted.

But after the moment of submission of documents to the tax office it should take 6 days. After this period, you will receive either documents on state registration of liquidation of a legal entity of an individual entrepreneur, or refusal to liquidate the company, indicating the reasons for rejection of the application.

Reasons for the liquidation of a company can range from a lack of funding to a loss of interest in a particular area.

Also among the most common reasons for closing a business:

• Bankruptcy: outflow of financing or loss of confidence on the part of investors;
• Business reorganization: expansion of the company or transition to other business formats. For example, closing a store and opening an online platform;
• The death of the founder or his relocation.

• There are only two ways to suspend a business entity’s activities:

• Voluntary: if the members decide to close down the company;

• Involuntary: the organization ceases to exist by court order. But in both cases, after liquidation, the company is removed from the Pension Fund, Social Security Fund, and after paying off the debt (if any), you will receive a certificate of termination of the company in the tax authority.

The main question that entrepreneurs have at this stage is: maybe it is worth just announcing the termination of business activities and put an end to it? In this case, the company will be liquidated by the tax service on its own initiative, and the founders will be banned from registering new companies within three years.

If this prospect does not tempt, it is better to carry out liquidation by law, following the key rules and regulations.

Liquidation of a legal entity (IE) is a time-consuming process. In addition to collecting documents and collecting the liquidation commission, it is also necessary to interact with the authorized services.

In 80% of cases the liquidation process is delayed. Reasons for that are incorrect execution of documents or deadlines for their submission to the authorized bodies.