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Dissolving a company: Is it right for my business?

Dissolving a company Is it right for my business

Dissolving a company Is it right for my business

Also known as ‘dissolution’ or ‘striking off’, dissolving a company is when a company is closed and is no longer showing as “Active” at Companies House – the legal register of all companies in the UK.

Some reasons why you might consider dissolving your company include:

* You want to retire from the business and don’t have a succession plan
* Your business never really got up and running and is now dormant
* Your business has been slowing down for some time so, while still profitable, it isn’t really worth keeping open

What’s the difference between dissolution and liquidation?

Dissolution is only right for companies that don’t have any debt. If your company can’t afford to pay its debts then it is insolvent. If you want to close the company then it’ll need to be liquidated via a Creditor’s Voluntary Liquidation.

If your company is solvent, but you have some major assets, then it may be more tax efficient to pursue a Member’s Voluntary Liquidation instead of dissolving your company.

A compulsory liquidation is a liquidation that’s started by a creditor (often HMRC) that wants to force you out of business.

Can I dissolve my company

In addition to being solvent, your company must meet a number of criteria to qualify for dissolution. Your company must:

* Have stopped trading for at least three months
* Not have changed names in the last three months
* Not have been threatened with insolvency or have been participating in creditor agreement, like a Company Voluntary Arrangement

How can I dissolve my company?

Actually dissolving your company is simple. It is a simple process on the Companies House website. You also need to notify ‘notifiable parties’, including creditors, employees and shareholders.

What’s a little harder is all the things you need to do before you actually close your company. This includes:

* Distributing assets to shareholders. Any assets left in a dissolved company become property of the Crown
* Paying final wages and satisfying redundancy requirements
* Paying outstanding taxes, including Corporation Tax, PAYE and employer’s National Insurance
* Filing your final accounts and company tax return
* Asking HMRC to close your company’s payroll scheme
* Confirm your company has paid outstanding debts
* Closing company bank accounts
* Informing all interested parties that you intend to dissolve. This must be done within 7 days of longing an application with companies house

Exercise caution when dissolving your company

Dissolving your company may seem like a cheap and easy way to close down. But you can face severe penalties if you fail to do it properly.

Common dissolution mistakes include providing false information in your application, failing to notify an interested party and trying to dissolve your company when you shouldn’t.

If a creditor believes that your company hasn’t been closed through the correct channels, they can have your company restored to Companies House and you may become liable for unpaid debts.

In this way, liquidating your company is more final. And, as discussed previously, it may be more tax efficient.

Before you decide to dissolve your company, its best to take advice from an expert. A licensed insolvency practitioner will be able to tell you whether or not you qualify for dissolution and whether it’s the right course of action for you. They can also help manage the process, ensuring all of the ‘i’s are dotted and the ‘t’s crossed.

For more information or advice on dissolving your limited company, speak to a member of the team today. Call: 0800 611 8888.