Closing a Limited Company

Closing a Business

You may need to close down a limited company at some point, and this Quick Guide outlines the actions you'll need to take to do so.

To close a business, you'll normally need the approval of the company's directors and shareholders.

The manner in which you close the business is determined by whether it is solvent or insolvent.

Companies that are solvent

If the company is in good financial standing, there are two ways to close it:

At Companies House, being 'Struck Off'

You can have the company stricken from the Companies House registry if the following conditions are met:

• In the last three months, he has not traded or sold any stock;
• In the last three months, he hasn't altered his name;
• Is not in danger of going bankrupt; and
• Has no creditor arrangements, such as a Company Voluntary Arrangement.

If your business does not satisfy these requirements, you will have to voluntarily liquidate it.

You must officially close your limited company before applying to strike it off. This entails:

• Notifying interested parties and HM Revenue and Customs (HMRC) of your plans;
• ensuring that your employees are treated fairly and in accordance with the rules; and
• Taking care of your company's assets and accounts.

You'll need to fill out a strike-off application and send a copy to anybody who might be affected within seven days. This includes the following:

• Members (in most cases, the stockholders);
• Creditors;
• Employees;
• Any employee pension fund's managers or trustees; and
• Any directors who did not sign the application form will be disqualified.

Striking It Rich

To have your limited company struck off, you must send Companies House form DS01, which must be signed by a majority of the company's directors. Striking off a company costs £10, and payment cannot be made from an account that belongs to the firm being struck off.

Before applying, you should deal with any of the company's assets, such as closing any bank accounts and transferring any domain names.

What Happens After That?

Companies House will notify you by mail if you have completed the form correctly and if your request to strike off the company will be published as a notice in your local Gazette.

If no one objects, the firm will be struck off the register at the end of the term specified in the previous notice, and a new notice will be issued in the Gazette. The corporation will be formally dissolved at this point.

Staff:

If your business employs people, you must:

• If you're laying off employees, make sure you follow all applicable labour laws.
• Pay their last salary or wage; and
• Notify HMRC that your organisation is no longer hiring.

Assets in the Business

Before the firm is struck off, make sure that any business assets are distributed among the shareholders. Whatever is left will be given to the Crown, and you will have to repair the firm to get it back.

Accounts at the End

HMRC must receive final statutory accounts as well as a Company Tax Return. Although final accounts are not required to be filed with Companies House, you must:

Prepare your company's final accounts and tax return;

Declare that these are the final trading accounts and that the firm will be dissolved soon in your accounts and company tax return; and

Pay all outstanding tax liabilities, including Corporation Tax.

If you make a loss in your last year in business, you may be eligible to deduct the tax from previous years' profits. This is known as 'terminal loss relief.' This is something you can claim on your final tax return.

Personal Profits Capital Gains Tax

If you sell assets before the company is struck off, you may have to pay Capital Gains Tax on the proceeds.

Entrepreneurs' Relief may be available, but you'll need to calculate it on your own Self-Assessment Tax Return. If the sum exceeds £25,000, it will be considered income, and you will be required to pay income tax on it.

Keeping Track of Things

Business papers, such as bank statements, invoices, and receipts, must be kept for seven years after the firm is struck off. You must preserve copies of the company's employers' liability insurance policy and schedule for 40 years from the date the company was dissolved if it employed people.

Application Cancellation

If your company is no longer eligible to be struck off (e.g. trading or insolvent), or if you change your mind, you can withdraw your application as long as the firm is still on the Companies Register. The withdrawal form just requires the signature of one director.

Accountants in Brentford help small businesses & startups with their accounting and taxation matters, bookkeeping to keep their business running perfectly.