There are many reasons why someone might decide to close their company. Because a limited company is an entity in itself, the process of closing it down could be more complicated than you’d think.
In this article we explain the process on how to close a company, and how you can make sure to do everything correctly. We’ve also written articles about what happens when all directors leave the company, and how to resign as a director of a company, which you might find useful depending on your circumstances.
how to close a limited company:
1. Inform everyone The first thing you should do is inform all staff and shareholders that the business will be closing. This allows them to plan their next move as early as possible.
2. Stop all trade Close the business premises, and only make the necessary final transactions. Stop doing any work, and contact suppliers etc.
3. Pay your debts If the company owes money to anyone, such as suppliers or lenders, these debts should be paid if possible. Make sure to set aside enough money to pay all taxes that you’re still due.
4. VAT Contact HMRC to deregister from VAT, and pay your last VAT payment.
5. PAYE Submit all final tax returns, issue P45s to your employees, and pay any outstanding National Insurance deductions and outstanding tax.
6. Corporation Tax After you have seized trading, you can inform HMRC that the business has stopped trading. You can also complete a final set of accounts, and pay the last corporation tax.
7. Self-Employment If you will be employed by another company, or retire, you should inform HMRC that you will no longer be self employed.
8. Distribute assets Any remaining assets should be distributed among the shareholders. Keep in mind that depending on the value of these assets, income tax or capital gains tax could apply.
9. Empty your bank accounts Make sure to completely empty any bank accounts, as any remaining money will go straight to the government.
10. Companies House Give a notice to Companies House to inform them that you want the company struck off. If no one objects, the company will be struck off after 3 months, and will cease to exist.
12. Keep records You’re legally required to retain records of your company for at least 7 years. These records could include invoices, receipts, bank statements and other documents. Arrange for these to be stored securely.
Closing down a limited company can often take many months. By following these steps in order, you’re setting yourself up for the easiest possible closure.
In most cases, your accountant should be able to help you ease the transition, and guide you through the process of closing your company the right way. If you’re considering closing your business in the near future, I recommend you reach out to your accountant as soon as possible for guidance and advice.