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.
As a business owner, you may find yourself at a crossroads where continuing your company’s operations no longer seems viable. Perhaps market conditions have changed, personal circumstances have shifted, or you’re simply ready for a new challenge. Whatever the reason, you’re now faced with a critical decision: should you close your company entirely or make it dormant?
Closing a company means winding up its affairs completely, while making it dormant allows you to pause operations while keeping the company legally alive. Both options have their advantages and drawbacks, and the best choice depends on your specific situation and long-term goals.
In this guide, I’ll explore the key factors to consider when deciding.
What’s the Difference Between Dissolved and Dormant?
Dissolved means you’re closing your company permanently. Once dissolved:
Your company no longer exists legally
You can’t trade or take on new debts
All obligations must be settled beforehand
Dormant, however, means your company isn’t trading (or receiving money from investments) but still exists. In this state:
Your company remains registered
You don’t trade or generate revenue
You still file your confirmation statement (previously annual return) and annual accounts with Companies House
If your company is small enough to be considered a micro-entity, you can submit dormant (simplified) accounts.
Dissolved or Dormant: What’s the Best Option?
Keeping your company dormant might be the right choice if:
You think you might restart the business later and simply need time away
You want to retain your company name and structure
You’re willing to handle minimal annual filings and costs
Dissolution could be better if:
You’re certain about not returning to this business
You want a clean break from all obligations
You prefer to avoid any future filings or compliance activities
As you weigh these options, think about your long-term business goals and financial situation. How much effort are you willing to put into maintaining a dormant company? Or would you rather have the finality of dissolution?
Remember, there’s no one-size-fits-all answer. Your decision should align with your specific circumstances and future plans.
FAQs: Should I Close My Company or Make It Dormant?
How do I prepare my company for dormancy?
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.
What are the immediate steps after deciding to close my company?
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.
