Close or make Dormant
Author
Shaun Barton | Company Closure Expert
Should I close my company or make it dormant?
If you’re unsure whether to close your company or make it dormant, the best option depends on your plans for the future. If you’ve received a permanent job offer, for example, there may be little time available in the foreseeable future to run the business.
Conversely, you might just want to take a break from the pressures of business life. Making your company dormant does offer you choices if you’re currently undecided, but closing it down might also provide the motivation to move on if that’s what you want to do.
So how do you close a company or make it dormant, and what does each mean in practice?
Closing a limited company
You can close down a solvent company in two different ways – the most suitable generally depends on the value of retained profits available. Members’ Voluntary Liquidation (MVL) offers a tax-efficient way to close your company if it has £25,000 or more in assets and cash.
If your company doesn’t own valuable assets, voluntary dissolution may be the simplest route to take. Both of these methods ultimately mean the company name will be removed from the Register of Companies and cease to exist.
Considerations
- If you close your company rather than making it dormant there’s no further business administration to conduct
- If you closed it down and later regretted your decision, you’d have to start the company formation process again
How to close your company
The first step is to obtain professional advice to determine the most suitable method. Our experts at Company Closure can help you with this and provide the reliable guidance you need.
Members’ Voluntary Liquidation must be administered by a licensed insolvency practitioner and typically takes around six months to complete, depending on the complexity of your business affairs.
Voluntary dissolution is carried out by you and your fellow directors. You must have ceased trading for at least three months and followed a specific set of requirements in winding down your business prior to applying.
Making a company dormant
Making your company dormant offers some breathing space to make a decision with more confidence. A dormant company remains on the Companies House register – it isn’t active, but it can remain dormant indefinitely.
Considerations
- If you decide that you want to trade again you can do so quickly
You’ll still have to file annual accounts if the company is dormant and submit your Confirmation Statement. Dormant accounts are simplified versions of ‘standard’ company accounts.
How to make your company dormant
You must inform HMRC that you want to make your company dormant, file your tax return, and pay any taxes liabilities that are due up to the point that the company becomes dormant.
The business remains on the register of companies so there’s no requirement to notify Companies House, although you have to submit your Confirmation Statement to them each year.
If you’d like more advice on whether to close your company or make it dormant, please contact our experts at Company Closure. We offer free advice nationwide and will recommend the most suitable option for you.
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