How To Make A Company Dormant?
Do you have a business that is not making any money? Is it taking up too much of your time and energy, but you cannot let it go? Have you considered what would happen if the company was dormant instead of closed entirely? There are many reasons why business owners decide to make their company static, but it can be an advantageous way to save money and plan.
What does making a company dormant mean?
If a company is not doing business and making money can make it dormant, it will not be active anymore. It differs from closing a company because dormant companies will still be on the register at the company’s house. Even though you will need to file the documentation, you do not have to file the returns or do not need to pay the corporation tax during the period of dormancy. Remember you must follow the applicable laws of the company’s house.
How to Restart a Dormant Company?
When making a dormant company, the director must inform the tax office about starting to run the company. Must do within three months from the date of the company’s restart.
You must complete three basic steps to activate your dormant company.
- First, directors should inform HMRC about the reactivation of the company and register for corporation tax. Further, any withstanding corporation tax bills due must be paid within nine months and one day of the company’s accounting reference date.
- Next, must send company accounts to the Companies House within nine months of the company’s accounting reference date.
- Finally, should submit a company tax return to HMRC within twelve months of the company’s accounting reference date.
Further annual statutory accounts of the company’s house will show the reactivation of your company; therefore, there is no need to inform the company’s home.
Why do business owners make their companies dormant?
Many reasons are there to make the company dormant instead of closing it down.
When you start, some businesses look like they will never make any money; therefore, there is no point in paying the annual fees or following other regulations when the company is not trading.
- They do not want to close the company because they can use it later if the circumstances change with better opportunities. After all, it will take time and money. Besides, there is no need to re-register with Companies House or change structures entirely.
- Maybe you have a plan to sell the company and have not found a buyer. The potential buyer might be interested because it is an easy transition into ownership without taking over operations at once. When the company is dormant, it shows a buyer that it is not in debt.
- If you have filed all your accounts in the past and the company has been dormant for two years, you will get the exemption from corporation tax.
- You don’t need special permissions to make a company dormant since there is no transfer during closure which means none of the legal fees involved in shutting a company down completely. It also means less work if you have a sole trader or partnership.
- You can keep your company name in use which will preserve its reputation and allow it to be revived at any time to re-establish business activity. It is beneficial when dealing with government agencies that may require paperwork before approving a restart if the business has been dormant for several years.