WE have answered many questions about setting up a business in France but, this column, looks at the other side - closing down. Closing down effectively means officially stopping the company’s activity as a whole. This includes closing down all facilities where the business activity was being carried out. Closing down can be a voluntary decision made by the company owner, for example, when retiring or when operating expenses are no longer covered by business turnover. Sole traders must then take several steps to officially register the closing-down of their businesses.
1- Notifying the CFE (Centre Formalités Entreprises)
The business owner must fill in a declaration de cessation d’activité indicating the date of termination, along with the full name and address of the person closing the business down. This must take place within a month of the activity actually being stopped. Further to that déclaration, the business will be removed from the register’s list, whether at the chambre de commerce or the chambre de métiers et de l’artisanat (trades and crafts) according to the nature of the business and where it was registered in the first place.
2- Notifying the tax authorities:
2.1 Income tax
The closing down of a one-person business involves an immediate taxation of profits, if they have not already been taxed. The sole trader must submit an official statement to the tax authorities giving details of the company’s profit, along with a summary of its profit and loss account, and turnover details for the last period of activity. The deadline for these to be sent to the tax authorities is 60 days.
Profits to be declared include:
- Operating profits made between the end of the last tax year and termination date.
- Benefits with a deferred tax payment.
- Equity (negative or positive) at the time of closing the business down.
A declaration notifying the business closing down must be made within 60 days. The closing down of the business leads to the VAT account being shut down too: the VAT that can be claimed back is then deducted from the VAT collected and if in credit, the sole entrepreneur gets paid the given amount back.
3- Notifying social agencies
Usually, these are kept informed by the CFE which informs all relevant bodies of the business being closed down. However, it is safer to inform them directly too.
3.1 Health Insurance
The sole trader must inform the RSI (Regime Social des Independents) within 30 days. The RSI will then immediately calculate the contributions owed for the year, minus contributions already paid throughout the year. Whether in debit or credit, the outstanding balance will have to be paid (either to the RSI or back to the entrepreneur, depending on the balance) at the usual time (1st April or 1st October).
3.2 Family allowances
The sole trader should tell URSSAF about the business closing down as soon as possible. The trimester in which the closing down takes place is due in full. Payment for these contributions must be made within 30 days of the business being closed down.
Sole traders should make sure that they are removed from the pension scheme which they belong to (RSI for instance, or Caisse d’Assurance Vieillesse pour les Professions Libérales). For shopkeepers and craftspeople, contributions are calculated up to the last day of the trimester during which the business is closed down.
This is merely an overview of the main steps to be taken when wanting to close down a business as a sole trader. Always ask your local CCI or chambre de métiers, or chartered accountant, if you have one, for further information.