If Starting a Business in Portugal or in any other country is a relatively easy decision to make. Closing a business in Portugal is a difficult decision that requires following a few steps.

In this article, we'll explain the steps you need to take to close your business in Portugal.

How to close your business in Portugal

It is important to keep these in mind, regardless of the company’s financial situation, and to continue recording the transactions that take place between the time you make the decision and the time you close your business. Accounting records must be kept up to date and retained for ten years after the business closes.

Pay special attention to all of this documentation and where you will store it. The files do not need to be on paper and can be stored digitally.

Closing a Business in Portugal: How to Begin the Process of Closing Your Business

If the company owns real property, a notarized deed must be executed to initiate the process of dissolving or liquidating the company. The division of real property must be carried out by means of a notarized deed, and registration must be requested with the respective land registries.

If there is no real estate involved, but the business is a corporation (we exclude sole proprietorships and self-employed individuals), it is sufficient to submit the minutes of the resolution to dissolve the company to the notary. This document proves that a general meeting was held and that a qualified majority voted to dissolve the company.

Once the dissolution is finalized, the company immediately enters liquidation. As of that date, the closure must be reported to the tax authorities and Social Security.

The Three Phases of Closing a Business

Closing a business can happen fairly quickly, but it necessarily involves several stages.

1 . The dissolution meeting deliberates on the closure of the company. This generally requires a majority of votes. Financial statements must be prepared and submitted when the decision to dissolve the company is made. Essentially, this is the only way to determine the company’s financial status (assets and liabilities).

2 . The settlement phase. This is the period during which assets are sold, outstanding amounts are collected, and all of the company’s debts are paid off. The goal is not only to leave the accounts «in order,» but also to have assets and cash that can be distributed among the partners.

3 . Division of the Remaining Assets occurs when, after all obligations have been settled, there are remaining assets that can be distributed among the partners in proportion to their ownership interests in the business.

The dissolution proceedings must be finalized, and all necessary actions must be completed within two years. Upon registration, the dissolution is considered complete. Please note that outstanding shares or debts do not automatically cease to exist; former partners may still be held liable for them.

Finance

In the specific case of the tax authorities, you can close your business through the financial portal by following all the steps outlined in the electronic filing manual for business closure.

The deadline is 15 days after the company is dissolved.

Social security

No later than the 10th of the month following the cessation of business, you must notify Social Security of the closure. The form can be submitted through the Social Security website.

Until these steps are completed, Social Security considers the company to still be in operation and will require it to pay its contributions. Failure to notify Social Security of the company’s closure may result in a fine.

Shutdown of Economic Activity

There are also situations in which you will need to report the closure of your business. For more information, visit the portal Business Section and search for your industry.

The Commercial Dissolution Registry

Within two months, the registry of business dissolutions must also be established. This registration must be done by transcription, which means it must be approved or rejected by a registry official.

These procedures can be completed by line. You'll need your citizen card and your digital code.

Rapid dissolution

In certain cases, access to a streamlined process known as “dissolution and liquidation” is also permitted.

However, this procedure is feasible only if there is a document proving the unanimous decision of all the partners to dissolve and liquidate the company. More importantly, there must be no assets or liabilities to settle.

The process can be completed in person at a commercial registry office.

The following documents must be submitted:

• Citizen Card; ;
• Tax ID numbers of the partners; ;
• Identification card and Social Security number of the legal entity; ;

Request Form 1 from the IRN, fill it out, and sign it. You will also need the minutes of the general meeting showing that the decision to close the business was unanimous.

Once the documents have been submitted and verified and the request has been made orally, the registrar may immediately issue a decision declaring the liquidation and closure of the entity.

In this case, it is also necessary to ensure that the dissolution and the termination of liquidation are registered simultaneously by issuing the certificate of registration to the interested parties. The cessation of business operations is immediately reported to Social Security and the tax authorities.

In addition to being faster, this process is also less expensive, costing an average of 300 euros.