Forming a limited company is a simple enough process and one you can usually complete in just a few hours.
However, closing or ‘dissolving’ a limited company can be a different matter entirely without professional help.
But, although there’s nothing like a bit of specialist assistance to help you make sure everything is covered off, it is possible to close your limited company the right way on your own.
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Closing a limited company: What are your options?
Before you close your limited company, it’s important to understand the different options available to you.
Here are the most common methods:
1) Members’ Voluntary Liquidation (MVL)
This option is suitable for solvent companies (i.e., companies that can pay their bills) with assets of over £25,000.
In an MVL, a licensed insolvency practitioner is appointed to liquidate the company, pay off any debts, and distribute the remaining assets to shareholders.
2) Dissolution
This is a simpler and cheaper option for small companies that have not been trading for at least three months and have assets of £25,000 or less.
It involves applying to Companies House to have your company dissolved and struck off the register.
You can dissolve a company whether or not it has debts but the process is different for each scenario.
3) Creditors’ Voluntary Liquidation (CVL)
This option is suitable for insolvent companies (i.e., companies that cannot pay their bills) where there is no likelihood of recovery.
A Creditors Voluntary Liquidation must be handled by an insolvency practitioner and involves voluntarily winding up the company and selling its assets to repay creditors.
4) Compulsory liquidation
This is the most severe form of liquidation and is initiated by creditors if your company cannot pay its debts and no agreement can be reached.
5) Making the company dormant
If you believe your company may be viable in the future, you can make it dormant. This means that it is no longer actively trading but can be revived later.
To choose the right option for you, it’s important to consider the following factors:
- The financial health of your company
- The size and complexity of your company
- Your future plans for the company
It’s also advisable to seek professional advice from an accountant or insolvency practitioner to ensure that you choose the best option for your specific circ*mstances.
How to close a company with debts
If your company has debts or is trading whilst insolvent the steps outlined below do not apply.
There are many further things that need to be done or you risk fines or, in severe cases, imprisonment.
Read –How to close a limited company if it has debts
Thinking of closing your limited company?
Does your company qualify for closure by Dissolution?
Find out if it qualifies for Dissolution with our Limited Company Dissolution Test →
Or, call our UK advisers for some free, no-obligation advice on 0800 975 0380
How to close a limited company without debts
If there are no debts then the process below tells you how to close your company.
Step 1: Work out closing date for your company
You’ll need to work out a date to cease trading and let anyone with an interest in the company know (other directors, bank etc). You’ll also need to tell all the shareholders and agree a date.
Step 2: Send form AA01
If the date you decide is different to your normal accounting date you’ll need to fill out a form from Companies House called AA01. You need to sign it and send it to Companies house (you need to send a copy to HMRC too).
Step 3: Contact HMRC to tell them
Once the agreed closure date has passed send a letter to HMRC to say you’ve stopped trading and there is no further taxable income, also let them know that final accounts will be sent in due course.
Step 4: Close company schemes
If your company employs people or it’s registered with CIS scheme you’ll need to let HMRC know that both schemes should be closed as they are no longer needed.
Step 5: De-register VAT
If your company is registered for VAT you’ll need to de-register by filling out VAT form 7 and then prepare a final VAT return.
Step 6: Register as Sole Trader if needed
If you are planning to trade afterwards as a sole trader you’ll need to register with HMRC as such.
Step 7: Inform HMRC about tax returns
If you aren’t planning on being a sole trader or partnership and are going back to employment/retiring you need to tell HMRC that no further tax returns will be needed after your final one has been done.
Step 8: Prepare final accounts
Get your final accounts prepared with your Corporation tax return and submit them to HMRC and Companies House.
Step 9: Wait for three months
Wait for three months after the closing date and apply for your company to be struck off by completing form DS01.
You can complete the DS01 online here.
Step 10: Closure application published
Companies House will publish these details in the Gazette and then (if there are no objections) will dissolve your company after a further three months. Once this has been done the company can be considered completely closed.
Closing a limited company frequently asked questions
Can a company director start a new company after closing a company?
Yes, a company director can start a new company after closing a liquidated company, as long as they have not behaved improperly and they adhere to all of the requirements of Companies House. However, they cannot use the same or a similar company name to the liquidated company.
Read – Can I Close a Limited Company With Debts and Start Again?
How long does it take to close a company?
If the company is simply being struck off the register at Companies House, it takes around 3 months to receive confirmation. This can take longer if the company has debts at the point of application.
Liquidation is likely to take much longer, especially if there are assets to dispose of.
What is phoenixing and why is it prohibited?
Phoenixing is the process of closing a company and then reopening it under a new name, often with the same directors and shareholders. This is prohibited by Section 216 of the Insolvency Act because it allows directors to avoid paying off their debts.
Can I get help to close my limited company?
Yes, you can get help to close your limited company from a professional such as Forbes Burton. We can help you to liquidate your company voluntarily or avoid a compulsory liquidation. We can also help you to dissolve your company even if it has debts.
Who do I need to notify about a closing a limited company?
Within seven days of sending a DS01 form to Companies House, you are legally required to notify the following interested parties:
- Employees
- Shareholders (also known as members)
- Any directors who did not sign the DS01 form
- Creditors
- Managers or trustees of a pension fund set up for employees
What happens if I do not notify interested parties about closing my company?
If you do not follow these steps, or any of the other processes outlined in the strike-off process, you may be prosecuted or fined. It will also delay the dissolution, and interested parties who were not previously notified may be able to object.
Why is it important to notify interested parties?
Notifying interested parties about a company strike-off is important for several reasons:
- It gives them an opportunity to object to the strike-off if they have any concerns.
- It ensures that they are aware of the implications of the strike-off, such as the fact that the company will no longer exist and that they will no longer be able to claim against the company’s assets.
- It helps to avoid any disputes or legal challenges down the road.
How do I notify interested parties about closing my company?
You can notify interested parties by sending them a letter or email. The letter or email should include the following information:
- The name of the company being struck off
- The date on which the DS01 form was sent to Companies House
- The deadline for objecting to the strike-off
- The contact information for Companies House
You should also send a copy of the DS01 form to each interested party.
If you have any questions or concerns about notifying interested parties, you should seek professional advice from an accountant or insolvency practitioner.
Need some help with closing your limited company?
If you are thinking of closing your company or have tried and had an objection from HMRC (or others), don’t hesitate to get in touch with one of our business advisers today to to get some free, confidential advice.
You can call us on 0800 975 0380 or email [emailprotected] We’ll be able to advise you on what solutions are best for your specific situation.
We have a fully managed service where we take care of closing a limited company for you and make sure everything is done correctly. We can also help if your company has debts.
Find out more about our Limited Company Closure service.
