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How to Register a Dormant Company

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How to Register a Dormant Company

How to Register a Dormant Company

How to Register a Dormant Company

Making your company dormant is very similar to registering any limited company to Companies House. The same required formalities that you needed when you setup your company when you started trading will be required of you again. Among what’s required in switching your company’s status from ‘active’ to ‘dormant’ involves selecting an "SIC code" for your company. A unique SIC code is given to every dormant company.

This becomes apparent when you enter an SIC code "99999" in the registration form from Companies House that you intend to keep your company dormant until you are ready to trade again. Once your company has been registered as ‘dormant’ in Companies House, your company’s registered the SIC code will be publicly available.

What Is a Dormant Company?

A dormant company is a limited company that has been incorporated and is registered with Companies House, but its owners/board of directors have decided to keep it inactive and not trade. Normally, the reason why companies choose this option is to prevent other businesses to use their legally registered name, or perhaps they only want to get a legal business name quickly, but they intend to trade at a later time.

A Dormant Company will have no "significant accounting transactions" and as such will not pay any taxes or engage in any business activity.

What are Dormant Company Filing requirements?

Companies House requires dormant companies to continue filing annual accounts and a confirmation statement every fiscal year. The dormant companies accounts will show up on the filing history of the company in Companies House, which auditors and other interested parties can access.

Starting a New Dormant Company

If you wish to start a new dormant company (a company which has been incorporated, but has never traded or has no intention to trade), then include your company legal name, as well as your preferred suffix (e.g. “Limited” or “Ltd.”) in the Companies House page dedicated to making companies dormant and hit “enter.” Don’t forget to also include the domain name, which you’ve purchased from a hosting site for your company, because you will need it once you resume trading operations.

Dormant Company Checklist:

1. Carry out a company name search.

2. Register your limited company name.

3. Inform HMRC of your intention to keep the company dormant

4. Submit dormant company accounts and confirmation statements where necessary

5. Then when you're ready – start trading

6. (Don't forget to inform HMRC when you do).

7. Start trading and engage in business activities

Once you’ve registered your company as dormant or inactive in the Companies House database, it will remain that way for only 1 year. If you want to keep your company dormant for a certain period of time until you’re ready to trade again, then you must file company dormant accounts and annual confirmation statements every year. You’ll also need to inform the HMRC that you’re putting your company in dormant mode and you do this by getting a copy of their CT41G form after you’ve informed them of your intent to make your company dormant.

Alternatives to Registering a Dormant Company

You can also go to a third party company that assist other companies in processing their businesses in order to make them dormant like Companies Made Simple, and of course, us Your Virtual Office London. You’ll get the added benefit of gaining a better credit rating and find it easier to acquire investment. People will also have a higher trust rating towards you because you’ve partnered with a trustworthy company like us.

The benefits of owning a dormant limited company are:

1. Your interests are protected – no one can use your legal business name and having the ability to take time to craft a business strategy and financing before resuming trading.

2. Preserving your limited company including all of its related legal rights, while allowing you to prepare years in advance before you resume trading.

Alternatively, you can also make your company dormant with the intent of having it hold assets such as real estate or a freehold property. However this purpose is of limited relevance to small business owners, so it will not be covered in this guide.

Sole Trader Business

Perhaps the most common reason why business owners make their companies dormant is to protect their businesses when they’re operating as a sole trader (sole proprietorship in the US, or also commonly referred to as being self-employed). Operating your business as a sole trader gives you more advantages as a small business owner than registering your business as a limited company. Overall it’s also cheaper and simpler to run your business as a sole trader, it’s the reason why there are so many SMEs (small business enterprise) and start-ups opt for this type of business than the more complicated ones.

But there is one drawback to this option also, and it’s when you failed to trademark your business name, it gives other people freedom to register your business name as their own, as you have no legal grounds to prevent them from doing so.

You may also be interested to read Who Can Be A Company Director?

Limiting Reputational Damage

Through the power of social media, any kind of news (good or bad) can go viral and reach global proportions in minutes and can damage your company’s reputation with little to no warning. It’s even worse if another company has a nearly identical business name as you have, (i.e. Domnio XL Consultancy Services vs. Domnio XL Consultancy Services LLC), then several customers had a bad experience with your competitor, but when they left reviews online it was your company was tagged, or was tagged along with the culprit. In order to protect your company’s reputation, you register it as dormant which will prevent other people from registering with your company name and avoid the problem in the first place.

Protect your Business by Buying a Company and Keeping it Dormant

It’s a common practice in the UK for business owners and a company’s board of directors to unilaterally decide to put their company in dormant mode. This business tactic is important because it helps protect their business from being exploited by potential competitors (e.g. the copycat company registering a new business under the same name, which can cause serious problems for the original company). The formations process of making your company dormant and allowing it to trade once more is the same and it is done through Companies House. Pay £12.95 to have your company registered as dormant in the Companies House database and submit company dormant accounts and annual confirmation statements yearly to keep your company in dormant mode.

Preserving your Limited Company

Another scenario where a dormant company can be beneficial to you is when your limited company has been around for a certain period of time now, but you encounter an unexpected emergency and you need to put it on hold. It could be that you need to go abroad for some important work to do that’s not connected with your business, or from which your business depends a lot on and you’ve considered the costs of keeping it running vs. making it dormant, and the second option seems more reasonable.

The problem with keeping your company running is that you are required by the UK’s Companies House to file full company accounts and pay corporate taxes year after year. You will obviously need to hire an accountant to produce and submit these accounts, which will cost a significant amount. But even more problematic is if you’ll have to hire a temporary manager to help you manage your business too! This person will also charge you an insane amount of money, especially if they know how important your business is to the area where it’s operating and to you personally.

By making your limited company dormant, you can avoid much of the cost of maintaining your company, and you won’t need to go through the administrative process of closing down your limited company.

Closing Notes

Opting to put your company on hold or making it dormant may not always be your first choice when faced with a certain obstacle in your business operations, but it is worth knowing about it when the time will come that this is the best and only option you have in protecting your limited company and its interests. Be sure to talk to your company accountant about registering your limited company as dormant in Companies House before considering doing it. You can also talk to us and get free consultations.

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