Small business owners who closed their businesses last year decide to close their businesses when…

Small business owners who closed their businesses last year decide to close their businesses when store sales drop more than 40%, the survey showed. They already had an average debt of around 85 million won at the time of closing and paid an average of an additional 12.8 million won to close the store. The number of closed companies, which exceeded one million for the first time in 2024, fell slightly to 970,000.

According to the Ministry of SMEs and Startups survey on the status of closed companies and small business owners published on the 30th, the number of closed companies last year was 976,000, 32,000 less than the previous year (1,088). The closure rate was 8.64%, 3.23% less than the previous year (9.04%).

In May, the Ministry of SMEs and Startups analyzed the “current state of business closures” published by the National Tax Service on the 29th and the results of a survey of 1,500 small business owners who closed their businesses in the last year. This is the first time that statistics on the closure of the National Tax Service have been analyzed at a medium to medium-term level.

Although the overall closure rate decreased slightly from 9% last year to 8%, the closure rate for the top six industries (manufacturing, wholesale and retail, food, accommodation and services) where small business owners primarily work was 11% for the third year in a row, far exceeding the overall average. The Ministry of SMEs and Startups analyzed that the impact of the closure was concentrated on small businesses.

The closure rate was the highest in the retail industry (15.4%), followed by the restaurant industry (15.14%) and the electricity, gas and water supply industry (3.29%). The most common reason for closure was “business decline” (50.4%), which increases each year to 48.9% in 2023 and 50.2% in 2024. This means that although they were willing to continue their business, there are many involuntary closures that close without putting up with the slow sales.

By age, the share of people aged 60 and older closing businesses increased from 22.7% the previous year to 24.4% in 2025.

In a survey of only small business owners who closed their businesses last year, declining sales was also the leading cause of closure. 64.4% of those who closed decided to do so if sales decreased by more than 40% compared to normal sales. Even if sales fell, many people continued their businesses holding out for the time being and as a result, debt also increased.

68.5% of those who closed their business already had an average debt of 85.31 million won when they decided to close their business. By age group, 35.67 million won for those 20 years old and younger, 72.95 million won for those 30 years old, 76.73 million won for those 40 years old, 84.24 million won for those 50 years old and 98.97 million won for those 60 years old and older, and the older the age, the greater the debt. After deciding to close the company, it took an average of 7.7 months to cancel the actual business registration.

In the closing process (multiple responses), 45.5% of respondents said loan repayment was the most difficult. It was also not easy to decide when to close (37.3%) and recover the deposit and premium (30.7%).

The average cost of closure was 12.86 million won, followed by store demolition and restoration costs (5.59 million won), raw material costs (2.21 million won), and employee severance pay (2.05 million won).

Starting next year, the Ministry of SMEs and Startups will periodically announce the current status, actual conditions and statistics of business closures in July of each year. In September this year, the government will jointly investigate and announce the recovery path after the closure of the business with the National Data Agency. Based on this, it is planned to strengthen step by step the support system that leads to the diagnosis of management crises, rapid closure, restart and labor linkage.

Choi Won-young, head of the Small Business Policy Division, said: “The government’s role is to provide support so that once business closures do not become a cliff that destroys the lives of small business owners. We will hold regional consultations in the second half of the year so that small business owners who are in a management crisis or have closed their businesses can receive online and offline advice.”