How to close a sole proprietorship in 2024 without fines and additional charges?

A few years ago, to officially close your business, you had to collect a bunch of documents and visit a number of government agencies. But the process of closing a sole proprietorship in 2024 has become much simpler, so it can be completed faster and more efficiently. It is also worth knowing how to re-register a sole proprietorship after its closure, as such phenomena are now common.

How to re-register a sole proprietorship after its closure?

To begin with, what legal provisions regulate the procedure for re-registering a sole proprietorship after its closure? Which taxation system can be chosen and when? According to the tax explanations, a sole proprietorship can choose the simplified taxation system only once during a calendar year. However, if the sole proprietor was initially under the simplified taxation system and then ceased business activity, then upon re-registration in the same year, the person will be transferred to the general system. This provision is set forth in Article 291 of the Tax Code.

At the same time, according to the Tax Code, sole proprietors of groups 1, 2 and 3 may switch back to the simplified taxation system from January 1, 2025.

What should be done before closing a sole proprietorship?

Before submitting an application to the state registrar to close a business, there are several preparatory steps to be taken. Let's take a closer look:

1. The first stage is dismissal of employees

If a sole proprietor has employees, they must be dismissed in order to provide the necessary information in the combined report. There may be various grounds for dismissal, for example, at the employee's own request or by agreement of the parties. However, if the employee is unwilling to sign such a statement or does not get in touch, the business owner may choose the appropriate grounds in accordance with the current Labor Code of Ukraine.

2. The second stage is the analysis of reports and documents 

At this stage, it is still possible to correct any shortcomings related to the timely completeness, payment of taxes, and availability of all accounting documents. It is important to check these points because after the closure of the sole proprietorship, the tax authorities may visit with an audit. 

According to the Tax Code, the mere fact that an entrepreneur ceases to operate is a reason for a tax audit of documents for the last three years. However, due to quarantine and later military operations, the statute of limitations was temporarily suspended. Therefore, as of today, the tax authorities have the right to inspect the entire document flow of an already closed sole proprietorship, starting from January 1, 2017.

Therefore, if you have unpaid taxes, you must pay them, and if you don't have accounting documents, you must get them drawn up.

3. The third stage is the refund of overpayments

If a business owner has an overpayment of the Single Tax or the Unified Social Tax, he or she must submit an application to the State Tax Service for a refund to the business's current account. To find out whether there are any such balances, you need to log in to your e-cabinet on the STS website, in the section on the status of settlements with the budget.

4. The fourth stage is the cancellation of the Notification in the form No. 20-OPP

If a sole proprietor has submitted Form 20-OPP, it must be canceled before closing the business. You can check its availability on the website of the State Tax Service of Ukraine in the electronic cabinet. In the menu, select the category "Payer Credentials". In the section "Information on taxable objects" you can find the necessary information.

5. The fifth stage is the deregistration of a cash register or a cash register

If a sole proprietor has a registered cash register or software registrar, it must be deregistered. According to the Law on ECR, liquidation of business activity is considered to be the basis for canceling the registration of ECR and cash registers by the tax authorities in an automatic mode. 

However, the State Tax Service does not do this on its own, so an entrepreneur must address this issue before closing down. You can also check the availability of registered cash registers or cash registers in the electronic cabinet on the tax website, in the category "Payer's credentials", in the section "Information about cash registers".

6. The sixth stage is the closure of open accounts of individual entrepreneurs in all banks

All accounts must be closed before the sole proprietorship is liquidated. If the entrepreneur fails to do so in a timely manner and such accounts are still open after the sole proprietorship is closed, the main thing is that no money is received on them. The balance of funds at the time of closure of the sole proprietorship must be transferred to the individual's card. 

You also need to request from the bank a statement of cash flows on all accounts from the date of a possible tax audit to the date of the official closure of the sole proprietorship. The list of banks with open accounts can be found in the electronic cabinet on the website of the State Tax Service, in the category "Payer Credentials", in the section "Bank Account Data".

After successfully completing all these stages, you can apply for the closure of the sole proprietorship.

Stages of liquidation of a sole proprietorship

There are three main stages:

1. In fact, the closure of an individual entrepreneur.

2. Submission of the last (liquidation) statements.

3. Tax audit.

But the third stage is not mandatory. The tax authorities will use this right if they deem it necessary.

The liquidation of a business activity must begin with the submission of an application for closure. It is from this moment that a sole proprietorship ceases to be an entrepreneur. There are several ways to close a sole proprietorship:

• through the Diia portal,

• through any ASC in the country,

• through the state registrar and tax authorities. 

How to close a sole proprietorship through Diia?

To understand how to close a sole proprietorship online, you should follow the following instructions:

1. You need to obtain a personal electronic signature. You can do this at the tax office or from the comfort of your home via Privat24.

2. Go to the Diia portal. If you don't have a personal account on the site, you need to register it: add your email, phone number, receive confirmation codes, and enter your passport details.

3. Go to the Services section — Closing a sole proprietorship.

4. Check your personal data.

5. Check the information in the automatically generated online application form (all data is pulled into the application from the Unified State Register).

6. Click "Sign and send" using the EDS key.

After that, the application for closure of the sole proprietorship will be automatically sent to the Unified State Register and the State Tax Service. You can check the status of the application in your personal account on the Diia portal. A closure notification will also be sent to your email address. If an entrepreneur has been operating under the simplified taxation system, he or she will be removed from the register of VAT and EH payers. This is the easiest and most cost-free way to liquidate a business. 

How quickly can a sole proprietorship be closed through the ASC?

Regardless of where the sole proprietorship was registered, a person can apply for closure of business activities at any ASC. The person must have the original passport and code, as well as fill out the relevant application form No. 1 on the spot.

How do I close a sole proprietorship on the general taxation system through the tax authorities?

To deregister a sole proprietorship from the state authorities, you need to do the following:

1. Submit a corresponding application to the State Register in the form No. 12. The document can be submitted in electronic or paper form. Pursuant to Article 26 of the Law on State Registration, within 24 hours of receiving such an application, the state registrar must make changes to the USR and transfer the necessary information to the Pension Fund, statistics and tax authorities.

2. Deregistration with the STS based on changes in the USR. The date of deregistration will be the day when the data on the termination of the sole proprietorship was entered into the state register. However, the closure of a business does not relieve a person of obligations to the tax authorities.

How to check whether a sole proprietorship is closed?

To do this, go to the website of the Ministry of Justice and use a free request:

• in the online form, select the option — individual entrepreneur;

• enter your full name and passport details and identification code;

• obtain a form with data on the conduct of business activities. The status should be "Terminated".

How to submit liquidation reports?

Within 30 days after making a record in the Unified State Register of the closure of a sole proprietorship, liquidation reports must be submitted to the State Tax Service. The document must be submitted for the last tax period.

If the sole proprietor was a single taxpayer, it must be provided:

• a single tax return,

• report on the unified social contribution.

If the sole proprietor was on the general taxation system, in this case, the person must file:

• a declaration of income and property status,

• report on the unified social contribution.

Reporting can be provided in different ways:

1. In the electronic version on the website of the State Tax Service of Ukraine. But you need to have an EDS key for this.

2. Send a letter via Ukrposhta.

3. Come to the tax office in person and provide it in the appropriate window.

After submitting the liquidation statements, you need to log in to the tax portal in your electronic account and check the presence or absence of tax arrears.

If an entrepreneur has unpaid taxes, he or she must pay them and close all bank accounts.

How do I close a sole proprietorship account in Privat 24? You need to send an application to the bank branch and indicate this:

• the name of the bank;

• your full name and registration number of the account holder's account card;

• account number to be closed;

• the date of the application and signature.

Important! If an entrepreneur moves abroad for permanent residence, he or she can speed up the tax audit procedure when closing his or her sole proprietorship. To do this, you need to write a corresponding application to the State Tax Service. In all other cases, there are no such grounds.

However, remember that closing a sole proprietorship will not save you from debts that were accumulated during your business activity.