Should I close my company?
There may be a time in the life of your limited company that you decide to close it. This may be for a number of reasons, you may want to retire, stop trading or your company is experiencing financial problems and you decide that you want to close it. This is never an easy decision to make and needs to be made with the agreement of the directors and shareholders of the company.
You will have a choice, do you want to liquidate the company and its assets, do an informal strike of procedure at companies house or keep the company dormant
If you don’t want to use the company for the short term the option may be to use the option to keep the company dormant. If you are going to stop trading you may need to look at the options of striking off the companies house register or doing a formal liquidation.
A formal liquidation may be used if the company can not afford to pay its debts or there are retained profits over £25,000 that need to be paid out to the shareholders.
Keep it dormant
If you want to stop using the company for a period of time an easy option to take for your company is to make the company dormant. Dormant means that there are no transactions in your company accounts for a period of 12 months that makes up your accounting year.
Keeping a company dormant may mean that you de-register for VAT, PAYE and make the company dormant for corporation tax purposes. Making a company dormant for corporation tax will mean that the company does not have to file a corporation tax return for the accounting year.
Whilst the company is dormant it will still have to file dormant accounts with companies house and also file a confirmation statement each year. If these are not done on time penalties may be issued to the company or steps may be taken to close the company at companies house.
Strike off the company
Striking off the company will normally be done when you no longer want to use it and there are no debts and there is £25,000 or less in the company bank account to pay out to its shareholders.
You can strike off a company by filing the form DS01 with Companies House. When you follow this process you will need to make sure that all of the assets are disposed of and either sold or transferred to the company directors.
If any assets are left in the company at the date it is dissolved by companies house, these include any bank balances that the company has these will pass to the Government under the rules of bona vacantia.
If you do find yourself in that position and your bank account was transferred under bona vacantia you will need to either restore the company and retrieve the funds in the bank account or apply for a waiver to get access to the funds.
Liquidate It
Taking the option to liquidate a company should be done when there are debts that the company can not afford to pay or there are funds in excess of £25,000 and the company wants to close and make use of entrepreneurs relief and distribute this money to the shareholders.
To start the liquidation process you will need to appoint a firm of licensed insolvency practitioners to do this for you. They will need to be paid their fee and then they will guide you through the process of holding the necessary meetings to put the company into liquidation and deal with HMRC and any of the company’s creditors if you have any.
If you are doing a solvent liquidation this process will be ensuring that all the taxes due are paid and that they have received confirmation from HMRC that they are happy for the company to be closed and then distributing the cash reserves that are left over to the shareholders. .
What other options do I have?
If you aren’t wanting to close your company and would like to keep it open but need help to trade out of difficulty there are a few other options open to you. One of these is called a Creditors Voluntary Arrangement (CVA).
A Creditors Voluntary Arrangement is set up and managed by a licensed insolvency practitioner and will protect your company from the demands of HMRC and creditors while you have time to pay them and continue trading. It is a way to keep trading and to save your business and not close.
Next Steps
Any of these options should be taken with caution and with the advice of your accountant. Closing down a company is a permanent step and it should be done correctly to avoid any issues such as having money or assets caught by bona vacantia.
If you need any help or advice please feel free to reach out and book a call with us.
