How should I proceed with a corporate business closure?

A corporate business closure is a matter whose structure varies depending on how the tax procedures and the corporate registration procedures are to be settled.

Therefore, you must first decide on the direction: whether to suspend only the business or to completely extinguish the corporation itself.

For a corporate business closure, the closure date is, in principle, based on the day on which the suspension of business activities is applied for, and once the closure date is finalized, tax processing proceeds based on that point in time.

After the closure date, it is not possible to issue tax invoices, so setting the point in time is very important.

The closure value-added tax must be filed and paid by the 25th of the month following the month in which the closure date falls, and corporate tax is reported by reflecting it in the regular filing in March of the year following the business year in which the closure date falls.

In addition, you must also settle the obligation to submit payment statements for employment, business, and retirement income, and the report of loss of the four major insurances within 14 days after the employee's resignation date.

The methods of closure for a corporate business operator are largely divided into two.

The first is a method of merely filing a closure report with the tax office, and in the case of small corporations, there are many cases that are concluded in this way.

In this case, the corporate registration is maintained as is, and future resumption of business is also possible, but if the closed state continues for 5 years or more, the corporation is deemed dissolved, and 3 years thereafter, liquidation is deemed concluded.

The second is a method of proceeding all the way through the dissolution and liquidation procedures that completely wind up the corporation itself; in this case, the corporation is legally extinguished only after completing a resolution of dissolution at the shareholders' meeting, the appointment of a liquidator, the settlement of claims and debts, the determination of the value of the remaining assets and its distribution to shareholders, and the registration of the conclusion of liquidation.

Unlike a simple closure report, the registration procedures and the settlement of legal liability become the key issues. Therefore, if you are preparing for a corporate business closure, it is advisable to organize it in the following order.

First, determine the point of business suspension and the closure date
Second, review the tax filing schedule for value-added tax, corporate tax, and the like
Third, settle matters concerning employees and the four major insurances
Fourth, decide whether to keep the corporation in existence or to proceed all the way through dissolution and liquidation
Fifth, review the structure for settling the remaining assets and debts

In particular, if you proceed with a simple closure while debts remain, the liability issue may spread to the representative or directors, so it is important to review the financial status together with an attorney.

For a corporate business closure, setting a direction suited to the company's situation at the stage before deciding on closure is key to preventing future disputes.

Our firm provides comprehensive corporate legal advisory covering corporate business closure, dissolution and liquidation, debt settlement, and even the representative's liability risk.

If you are considering winding down your business, we recommend that you receive a structural review in advance.