How to close a business in Russia?

There is no point in us explaining why companies are forced to close, but in this article, we will talk about how to do it in Russia and whether you can just abandon it empty forever.

WHAT HAPPENS IF YOU DO NOT LIQUIDATE YOUR COMPANY?
You may think that if your LLC does not operate, you can abandon it; and the owner can be understood - the liquidation procedure is complicated and troublesome. And the legal entity will be ultimately closed itself by the Federal Tax Service, which may seem attractive. However, this decision may lead to some unpleasant consequences. Although a blank organization with no income or employees is not required to pay and taxes or contributions to different funds, it must from time to time report to regulatory authorities. For failure to submit such reports and returns, the LLC will be fined by the Federal Tax Service and the Social Fund. In addition, the company may be fined by Rosstat for failure to submit statistical reports. Note that business owners are also fined for this, and numerous fines may result in the foreigner being deported from the country. So, you want to shut your company down if it does not work anymore.

What else? You might think that if your business has debts to contractors or clients and they try to collect money through court, then you do not have to pay them - the debts will hang over the company forever. Indeed, while an individual entrepreneur is liable for the debts with his or her personal property, an LLC is liable with its charter capital only. But its director and members can be held vicariously liable for its debts and liabilities by a judge; it is called literally «subsidiary liability» in Russia. For instance, a firm was declared bankrupt and bankruptcy proceedings were initiated against it. If the company's assets are not enough to pay off creditors, then the remaining funds can be recovered from its management if it is proven that their actions led to the debtor's insolvency. So, if things are bad, simply pretending you are not involved will not work.

Another point is, as was mentioned, the Tax Service can (but does not have to) forcibly liquidate an abandoned firm if two conditions are met:
* No transactions on accounts.
* No reporting for the last 12 months.
Today, the tax service is actively cleaning up the registers of business entities. Often, for this purpose, premises are inspected: tax representatives come to the address of the LLC specified during registration to make sure that business activities are (or are not) carried out there. If this is not confirmed, data on unreliability is entered into the state register. But when liquidating an organization with debts to the budget or organization that did not submit reports, the majority participant and the director will be prohibited from registering another LLC and participating in its management for a few years, that is, disqualified.

The tax service actively checks how real the business relationships are and requires that due diligence be observed. Therefore, companies have to find ways to find out everything about their potential partners. If one of the founders or directors turn out to have been disqualified sometime, even a long time ago, the chances of cooperation are practically zero. In addition, the opportunity to participate in competitions, tenders, etc. is blocked.

So, if you want to keep doing business in the future, be sure to close your inactive LLC down. Note that we are talking about the Russian practice - it other countries, things may be different. So,

HOW TO LIQUIDATE A COMPANY?
This process takes a lot of time. Although the steps do not have special names like «dissolution», «winding up» and «termination» in the English convention, it is still a multistep and complex process.

Firstly, hold a meeting of the LLC members or prepare the sole founder's resolution if you started the organization alone.
In the minutes of the meeting or the resolution, write that you:
1) Decided to begin a voluntary liquidation of the LLC.
2) Approved the composition of the liquidation commission and its chairman, or appointed a sole liquidator. This function can be assumed by the director, accountant, sole founder, any of the LLC members or any other third party - natural or legal. The liquidator or liquidation commission will manage the company, including acting in courts on behalf of the legal entity without a power of attorney.
3) Approved the procedure and terms of liquidation. The maximum possible term is one year, and it is safer to indicate this. For example, if you indicate that the liquidation period will be 3 months, and the process drags on, it can only be extended by applying to the Commercial Court. This means paying a fee of 6,000 rubles and waiting for the court's decision.

The second thing you should do is report liquidation to the tax authority within 3 days with a notification on form No. R15016. In 5 working days, the tax office will issue you a sheet about the entry in the Unified State Register of Legal Entities that your company is in the process of liquidation. From this moment on, it is impossible to change the constituent documents.

The third step is notifying creditors:
Publish a notice of liquidation in the journal «State Registration Bulletin». This period cannot be less than two months. During this time, everyone to whom your LLC owes money can demand repayment of the debt.

Within three working days from the date of the decision, enter information into the Unified Federal Register of Facts of Activities of Legal Entities (Fedresurs).

Also, send a written notice of liquidation to counterparties to whom you have debts.

Next, warn all employees in writing of the upcoming dismissal no later than 2 months in advance. Also submit a written notice to the employment service no later than 2 months in advance, and if the dismissal is mass, 3 months in advance. When this period has passed, fire the employees, and do not forget that you need to give them severance pay and compensation for unused vacation and maintain the average monthly salary for the period while the employee is looking for a new job, but not longer than two months.

The fifth step. At least two months after the publication of the liquidation notice in the media, prepare an interim liquidation balance sheet - it can be done by an accountant. You will need to approve it at a meeting of the founders or by decision of the sole founder, and then submit it to the tax office, and it is also advisable to attach it as confirmation of publication in the State Registration Bulletin.

The next state is paying off debts. Immediately after the approval of the liquidation balance, settle your debts in the following order:
* first of all, pay off the persons to whom your company is liable for causing moral damage or harm to life and health, if any;
* secondly, pay off the employees under the employment contract for payment of wages and severance pay.

A month after the approval of the liquidation balance, pay off the debts of the third and fourth priority, namely:
* pay all taxes and insurance premiums, fines and penalties,
* and, lastly, the remaining debts.

After this, you can draw up a final liquidation balance sheet, which is also approved by the members or one member. Within a month from this moment, you will need to submit some closing reports to the tax service and the social and pension funds.

If your LLC has some property left, it is to be distributed among the participant.

And, finally, the last step - filing for the company termination with the Federal Tax Service. The state fee for terminating a firm is 800 rubles.

As you noticed, there are plenty of nuances that a business owner should keep in mind to close their doors for good, and it is worth finding liquidation experts that will take care of the most of the things themselves. We have long experience in helping with the dissolution of legal entities, so, if necessary, do not hesitate to contact us.


Need legal help? Feel free to contact us:
Tel: +7 909 961-19-09
Email: legalsolutions@inbox.ru
Visit us: Moscow, Zubovskiy bulvar, building 4/1, office 308



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