Closing down a company

As a natural part of business operations, closing a business and the liquidation of the company might be something that an entrepreneur faces. Sometimes an entrepreneur's life situation changes, and they move into an employment relationship or retire, which may make it necessary to cease business operations. The chosen form of business has a lot to do with the process of winding down business operations. As alternatives, it is also good to keep in mind selling the company or the company can be left as an existing, so-called shell company, for possible future business continuation.

In addition to terminating obligations related to the day-to-day operations of the company, such as payment of debts and termination of contracts, termination of business operations involves company law measures to terminate the company. When closing a company, tax aspects should also be considered to optimize taxation.


Termination of a limited liability company is regulated in the Limited Liability Companies Act and is often more difficult and expensive to implement than the termination of a general partnership or limited partnership or sole trade. Voluntary liquidation of a limited liability company takes at least six months, including settlement procedures and public challenges, so sufficient time should be reserved for the process. Liquidation of a limited liability company also involves costs, such as trade register fees and costs of preparing the final settlement.

In the context of liquidation of a limited liability company it is recommendable to optimize taxation. This means e.g. optimizing dividend payments and planning the company's liquidation date.



A general partnership and a limited partnership can be dissolved quite easily if the partners agree to cease operations unanimously. Otherwise, the liquidation process needs to follow the provisions set out in the General Partnership and Limited Partnerships Act. The operation is also considered to have ended if the number of partners has decreased to one and has not increased to at least two within a year.

In taxation, both general partnerships and limited partnerships are considered as deemed partnerships. Liquidation of a deemed partnership is equated to the sale of a shares in a company, and the partner may have a capital gain or loss in taxation, even if the partner does not receive a monetary benefit from the company. Before the liquidation of a partnership, partners can take the assets from the company as a private withdrawal, or the assets can be sold to an outsider. If a real estate, building, structure, security, or right is taken as a private withdrawal, the asset is valued at fair market value, and it can realize taxable income for the company. As for other assets, the original acquisition cost or the lower fair market value is used in the valuation. Taxable income can also be generated when the partnership sells its assets to an outside party. A notice of termination must be submitted to the trade register and the registers of the Tax Administration. The notice of termination of a general and limited partnership is free of charge.

We recommend contacting our experienced advisors for questions related to the termination of a company, so that the tax aspects can be taken into account and the possible tax consequences will not come as a surprise.




Termination of a sole trade is relatively simple. When terminating the business activity, the business operator or self-employed person must give up the assets of the business activity completely, for example by selling it to an outsider or transferring the assets to themselves as a private transfer. If the assets are sold, the sale price is the taxable income of the business activity of the business operator or self-employed person. If, on the other hand, the asset is transferred as a private transfer, a value must be defined for the asset to be transferred (original acquisition cost or the lower probable transfer price). Private use therefore does not realize an increase in the value of assets other than in those situations where the depreciation has exceeded the decrease in the value of the asset.

Termination of a sole trade is reported to the trade register and the registers of the Tax Administration when the assets of the business activity have been given up. The notice of termination of a sole trade is also free of charge.

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