In short:
Limited companies can be closed by their owners without any outside help.
It’s highly recommended that those tempted to do so should contact a trustworthy company closure expert first to ensure that they can
Even insolvent companies with debts can be dissolved.
When it comes to forming a company, the whole process can be completed in just a few hours.
Unfortunately, the same can’t always be said when closing a business.
Dissolving a limited company can potentially be a bit of a minefield without professional guidance. There are multiple factors to consider, and just as many things to double check.
However, in certain circumstances, and armed with the right information, it is possible to close a business on your own. We spoke to business closure expert and Senior Client Manager at Forbes Burton, Ben Westoby about the process.
Closing a limited company: What are your options?
Westoby recommends that “before you even think about closing your limited company yourself, you’ll need at least some idea of the different closure options available to you.”
Here are some of the most common methods. Some will only apply to certain situations and companies, but most directors will find a suitable method of closure among the following.
1) Members’ Voluntary Liquidation (MVL)
This option is suitable for solvent companies (companies able to pay their bills) with assets valued over £25,000.
In an MVL, a licensed insolvency practitioner is appointed to liquidate the company’s assets and use the proceeds to pay off any debts. Once all debts have been settled, the remaining funds are distributed among the shareholders, and the business is closed off.
2) Dissolution
If there is a possibility that you can close your business yourself, it’s a dissolution that you would be looking at.
A dissolution is the simplest and often cheapest way to close a small business. It involves applying to Companies House to have your company dissolved and struck off the register.
However, not all companies are eligible to use this method of closure.
Westoby adds that “at the very minimum, applicants will need to ensure that their business hasn’t been trading over the last three months, and that they don’t have assets totalling over £25k.
“Contrary to popular belief, a company can be dissolved whether or not it has debts. However, the process is different for each scenario, and you’re much more likely to require expert assistance when closing a business with creditors involved.”
Could you dissolve your company with debts? Find out with our free Limited Company Dissolution Test →
3) Creditors’ voluntary liquidation (CVL)
Should your business be insolvent with little likelihood of recovery, a CVL is an option available to you.
A creditors’ voluntary liquidation must be handled by an insolvency practitioner. Here, the owner initiates the closing down of the business, with the sale of its assets an attempt to pay off any creditors.
4) Compulsory liquidation
This is the most severe form of liquidation, but still very common.
Compulsory liquidations are initiated by a company’s unpaid creditors. Should a company’s bills not be settled, those owed the money can petition the courts to close the business down.
“While any business can start a winding-up petition against another company” Westoby explains, “we find that unpaid HMRC debts are usually the catalyst for such cases”
5) Making the company dormant
If you believe your company may be viable in the future, you can simply make it dormant.
Closing a company completely makes it incredibly difficult to revive later. By making a business dormant instead, you can ensure that it’s legally listed as no longer trading but has the option to restart down the line should you ever wish.
Which option works best for you?
To choose the right option for your business, you should consider the following factors:
The financial health of your company
The size and complexity of your company
Your future plans for the company
Make sure that you consult with a professional over which option works best. Forbes Burton offers free no-obligation consultations to business owners weighing up their options, and it’s strongly advised that company directors take advantage of this free advice to avoid potential issues with their closure.
Other companies may offer similar consultations, but beware of companies that only offer limited closure options. Those that only offer liquidations, for example, are unlikely to other you anything other than a liquidation, whether its suitable for you or not.
How to close a company with debts
It’s strongly advised that you don’t try to close a company with unpaid debts yourself
Unpaid company debts can significantly complicate matters during a closure, and if these aren’t taken care of correctly, directors can be fined, or even face 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 060 8505
How to close a limited company without debts
Assuming your company has no debts hanging over it, you may be able to close it yourself.
If you’re unsure if your business can be closed in this manner, give us a ring. Our free consultations will let you know if you can perform the closure without us.
In fact, our TrustPilot page shows reviews from dozens of business directors who’ve been given guidance to close their companies on their own. We’ve built our reputation on trust and never try to push services that companies simply don’t need.
For those that do have companies eligible, here are the steps needed to close a business yourself.
Step 1: decide on a closing date for your company
You’ll need to decide on a date to cease trading and let anyone with an interest in the company know (other directors, shareholders, banks etc).
Step 2: Send an AA01 form
If the closing date is different to your normal accounting date, you’ll need to fill out an AA01 form from Companies House. Sign it and make a copy, then send the original to Companies House and the copy to HMRC.
Step 3: Notify HMRC
Once the agreed closure date has passed, a letter should be sent to HMRC that notifies them that you’ve stopped trading. HMRC will then be aware that your company will have no further taxable income and that the final accounts will be sent in due course.
Step 4: Close any company schemes
Companies with employed staff or registration to a CIS scheme will need to make HMRC aware that such schemes can now be closed.
Step 5: De-register VAT
Those registered for VAT must fill out VAT form 7 and prepare a final VAT return before de-registering.
Step 6: Inform HMRC about tax returns
Any business owners hoping to move into employment or retirement afterwards will need to tell HMRC that no further tax returns will be needed after your final return.
Step 7: Prepare final accounts
Get your final accounts prepared alongside your Corporation Tax return and submit them to HMRC and Companies House.
Step 8: Wait for three months
After three consecutive months of not trading, you’ll be able to apply for your company to be struck off by completing form DS01.
You can complete the DS01 online here.
Step 9: Gazette publication
Companies House will eventually publish these details in the London Gazette and (assuming there are no objections from third parties) then dissolve your company after 70 days. Once the formal dissolution has taken place, the company is considered completely closed.
Can a company director start a new business after closing one?
Yes, a company director can start a new business after closing another, but there are a couple of caveats. Owners must not have been found to have behaved improperly in their previous role as director and cannot use the same (or similar) name to the company they previously liquidated.
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 usually takes around 3 months to receive confirmation of its closure. This can, however, 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 term given to 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 as it allows directors to avoid paying off their debts by simply closing down and starting the same company again without paying the prior company’s creditors off.
Can I get help to close my limited company?
There are a variety of companies that can help business owners to close their businesses, but few that offer the range of closure options that Forbes Burton do.
Even if you’re thinking of closing your business by yourself, it’s highly recommended to speak to a professional first to ensure that you’re not going to walk into any trouble doing so.
We’ve built our reputation by helping thousands of UK businesses to either recover or navigate closure, and our specialists know the procedures inside and out. We can also help business owners to avoid compulsory liquidations and even dissolve companies with debts.
Case study
We were contacted by a footwear retailer to help them close their business. The owner had been finding trade somewhat slow since the other retailers around their store had closed, leaving them alone in an area of the town centre that few had little reason to visit now. With long-term prospects looking uncertain, the owner decided that it would be an opportune time to retire. Given the ailing fortunes of the business, there were no interested parties in buying the company, so it was decided that they would simply close it down.
The few debts that the director had were small and the business still had funds available to pay them off. As such, we were able to talk them through the process of closing the business themselves.
After being quoted considerable sums elsewhere, they were shocked and delighted that they were able to close the business for a grand total of £33 themselves. Such closures aren’t suitable for every business, but in this case, it was straightforward enough to take care of themselves.
Now enjoying retirement, the director left a very kind review on our TrustPilot page and can now look forward to the future without any worries.
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/members
Any directors that didn’t sign the DS01 form
Creditors
Managers or trustees of a pension fund set up for employees
Why is it important to notify stakeholders?
Notifying interested parties about a company strike-off is important for several reasons:
It gives those with concerns an opportunity to object.
It ensures that they’re aware of implications, such as the company ceasing to exist and them not being able to claim against the company’s assets.
It helps to avoid any disputes or legal challenges later on.
How do I notify stakeholders about closing my company?
You can notify interested parties by sending them a letter or email. The letter/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 potential objections to the strike-off
The contact information for Companies House
You should also send a copy of the DS01 form to each stakeholder.
If you have any questions or concerns about notifying interested parties, you should seek professional advice from a company closure specialist.
What happens if I don’t notify interested parties about closing my company?
Keeping stakeholders in the dark about a company closure can lead to multiple complications. As well as delaying the process, ignoring this or other steps in the strike-off process can lead to fines or even prosecution.
Interested parties that find out about the closure elsewhere are able to object to it and slow down the process considerably.
Need some help with closing your limited company?
If you’re 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 for free confidential advice.
Call us on 0800 060 8505 or email advice@forbesburton.com for help and guidance on the best solution for your specific situation.
