reviewed-by
Reviewed by
Christopher Andersen
Avatar Image
Reviewed by Christopher Andersen
Chris is an Insolvency Practitioner regulated by the ICAEW since 2014,. He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.
Meet Our Experts
17th April 2024

In the face of financial challenges or a change in strategic direction, you might find yourself pondering whether to close your company or make it dormant.

Should-I-Close-my-Company-or-Make-it-Dormant_
Contents
  1. What’s the Difference Between Dissolved and Dormant?
  2. Dissolved or Dormant: What’s the Best Option?
  3. FAQs: Should I Close My Company or Make It Dormant?

What’s the Difference Between Dissolved and Dormant?

Dissolved refers to the process of legally closing your company. This is a permanent action. Once the dissolution process is complete, your company ceases to exist. It cannot trade, incur debts, or engage in any business activities. After dissolution, you are no longer responsible for the company, but you must ensure that all legal and financial obligations have been fulfilled prior to dissolution to avoid personal liabilities.

Dormant, on the other hand, means that your company is registered as inactive. While dormant, the company does not engage in any trading activities or generate revenue, but it still exists as a legal entity. Keeping a company dormant requires compliance with certain minimal reporting requirements, such as filing dormant accounts and annual returns, to maintain the company’s status with Companies House.

Dissolved or Dormant: What’s the Best Option?

If you plan to restart your business later, keeping it dormant is practical. This approach saves the hassle of creating a new company and maintains your business name and assets. It involves minimal annual filings and costs.

On the other hand, if you’re certain about not returning to business, dissolving the company finalises its closure, freeing you from ongoing obligations. Dissolution makes sense for a clean break, eliminating the need for any filings or compliance.

When making your decision, consider your long-term business goals, financial situation, and the effort you’re willing to invest in maintenance.

FAQs: Should I Close My Company or Make It Dormant?

To prepare your company for dormancy, ensure all debts are paid, and current contracts are fulfilled or formally concluded. Notify HMRC and Companies House of your intent to make the company dormant, and adjust your financial accounts to reflect no pending transactions.

After deciding to close your company, you should settle all financial obligations, inform all stakeholders, deregister your company from HMRC and other regulatory bodies, and file for dissolution at Companies House.