Liquidation and dissolution of the company on retirement

To dissolve and liquidate your company, you must follow these steps.

• Prepare the liquidation balance sheet.
• Approve the dissolution agreement, including the distribution of assets among the partners.
• Formalise the agreement in a public deed before a Notary.
• Register the deed of dissolution and liquidation at the Companies Registry.
• Allocate the assets.
• Submit and pay the ITPAJD (Corporate Transactions Tax) on the liquidation amount, and file the company’s deregistration with the Tax Agency and Social Security.
• Transfer ownership of any real estate or vehicles allocated to partners, where applicable.

If there are assets remaining in the liquidation balance sheet, this will generate a liquidation share. Each partner will receive their corresponding share at the time of liquidation, based on their ownership percentage in the company.

Warning:

In the case of non-liquid assets, if a partner later sells the asset, a capital gain may arise from the difference between the sale price and the acquisition value recorded at liquidation. For this reason, it is sometimes advisable for the company to sell the assets before liquidation so that only cash is distributed to the partners, helping to avoid additional taxation. Likewise, the allocation of assets must be made at market value, which may generate taxable profit for the company.

When a company is dissolved, employment contracts must be terminated with compensation equal to 20 days’ salary per year of service, capped at 12 months. This applies only where objective grounds are proven, such as economic, technical, organisational or production-related reasons. If such grounds do not exist, the compensation corresponding to unfair dismissal will apply.

This contrasts with the consequences of ceasing business activity as a sole trader. In that case, if you pass away, retire or become permanently incapacitated, employment contracts are terminated with fixed compensation equal to one month’s salary, regardless of employees’ length of service.

The buyer of your business is required to assume all existing employment and Social Security rights and obligations. This means that the employment conditions of the affected workers will remain unchanged unless a modification is mutually agreed.