Closing a Business
You may be considering closing a business for a variety of reasons, and it’s not always clear which is the best route to take. There are different options available depending upon the financial position of the business. Our experienced team members at Restart BTi are here and ready to help you discover which route is best for you.
At Restart BTi we help UK company directors with issues such as cash flow or HMRC pressure and concerns around Bounce Back Loan or Coronavirus Business Interruption Loan Scheme repayments, so you can be sure of straight-forward knowledgeable advice at what can be a difficult time.
Making the decision to close a business
We understand that making the decision to close a business can be difficult, with a variety of internal and external factors to consider that may appear complicated. The first place to get started is making a list of stakeholders that you would need to contact, such as accountants, suppliers and any insurance providers. This will enable you to organise your communications quickly and efficiently to ensure that all those involved in your business are aware of the plan to cease trading.
The next step is to consider your finances. If your business has any outstanding debts or payments, including rent or general utility bills, then you will need to explore your options as to resolving these payments as quickly as possible. At Restart BTi, we help UK company directors with issues such as cash flow or HMRC pressure and concerns around Bounce Back Loan or Coronavirus Business Interruption Loan Scheme repayments, so you can be sure of straight-forward knowledgeable advice at what can be a difficult time.
How do you close a solvent company?
A solvent company defines those that are able to pay off all debts with their income each month. If you wish to close a solvent company, our team members will be able to help you apply to get your company ‘struck off’ the Companies Register.
How do you close an insolvent business?
An insolvent company is more complex to close. This process can either include a Creditor’s Voluntary Liquidation or Compulsory Liquidation. These methods set out a plan to ensure that creditors are paid their debts through the sale of assets or a payment plan.
What steps do you need to take before closing a business?
The first and most important step in closing a business is to share your decision with any other Directors and shareholders to ensure that an agreeable and reasonable business plan is in place for an efficient closure. Here, you will need to consider which option is best for your business, creditors, staff and customers. To ensure the correct route is taken, it’s important to contact one of our experienced team members for your free, and confidential, consultation.
If you want to close a solvent limited company that has not traded for at least three months, applying to Companies House to have it struck off may be a more cost-effective alternative to liquidation. Once a company is removed or “struck off” the company’s House register it ceases to exist and is no longer able to trade.
As a Director, you still need to uphold your duties and responsibilities as an employer even if you are in the process of closing a limited company. After you’ve confirmed your decision, assessed your financial situation and contacted those affected by the closure, you then need to consider what options are available for your staff. Your duties will include:
- Considering redundancies
- Paying final wages
- Contacting HMRC
- Sending out P45s
- Closing your payroll
Your other responsibilities to begin closing your business will also include:
- Collecting all monies due to the company
- Completing any customer works or contracts
- Paying the company’s outstanding debts
- Sellingall of the company’s assets and distributing any proceeds amongst the shareholders, as long as these funds do not exceed £25,000.
- Preparing final accounts and a company tax return sending them to HMRC and Companies House.
- Paying HMRC any tax liabilities due (VAT, PAYE, NI or Corporation Tax)
- Closing down he company’s pension scheme
- Deregistering the Company for VAT with HMRC
- Closing the company bank accounts
- Dealing with any other company formalities e.g. closed or transferred website domain names, brought utilities and other services to an end
What’s the difference between strike off and a solvent liquidation (Member’s Voluntary Liquidation?)
Having a company struck off the register and dissolved is very different from a solvent liquidation. Strike off is a relatively short and informal process with little administration. It can be completed by the company directors themselves.
A solvent liquidation or Members ‘Voluntary Liquidation (MVL) is a formal process for winding up a solvent business that has surplus funds more than £25,000. A solvent liquidation enables a company to return its capital to shareholders in the most tax efficient way. This process must be carried out by a licensed insolvency practitioner. It costs from £ 2,000 +VAT. An MVL is tax efficient and typically takes up to six months to complete.
Although Striking Off and a Members’ Voluntary Liquidation are both ways to close a business down, there are many differences between them. See our Members Voluntary Liquidation page for further information regarding the process.
What is a Compulsory Strike Off?
In some cases, Companies House can instigate the striking off process. Compulsory strike off typically occurs for non-compliance reasons and is generally the result of failing to file the company’s annual accounts and/or confirmation statement.
There can be a number of consequences for the directors of companies that are struck off compulsorily.
These could potentially include:
- The company ceases to exist as a legal entity
- Undistributed assets of the company become the property of the crown
- The company will be unable to secure funding to rescue the situation
- Future contracts with customers and suppliers will be terminated
- Directors could be disqualified for a period of up to 15 years
- The directors and shareholders could be made personally liable for the business’s debts if they continue to trade
It’s important that accounts and confirmation statements are submitted on time and companies’ houses should be notified of any changes to the business e.g. a change of the business address.
Can I strike off my company if I have debts?
The short answer is no. Companies must be solvent to be struck off. If the company does have outstanding debts, they must be repaid in full before the company can be struck off. If the company is currently undergoing an insolvency procedure such as a Company Voluntary Arrangement or has been threatened with legal action such as a winding up petition, it cannot be struck off.
If the business is insolvent and cannot discharge its debts, we can assist the directors in taking steps to place the company into Creditors’ Voluntary Liquidation (CVL).
Get help with Closing Your Business from Restart BTi
Here at Restart BTi, our experienced team will work with you to make sure that you are given the right support and advice if you are considering closing your business . We endeavour to ensure that the procedure is concluded as quickly and as pain free as possible offering a competitive fixed fee pricing structure dependent upon the circumstances of the case.
The service includes a free initial consultation, expert guidance and support, confidentiality, and a fully licensed practitioner that will support and stay with you throughout the full process.
There are a number of unregulated advisors and brokers offering solutions; unqualified advice may not offer the right solution and could lead to the process taking longer than necessary with more costs being incurred. Contact our experienced team for a free no obligation consultation for directors that want to close their business with confidence. Call us today on 01246959388 or simply fill out the short form below.
If you’ve stopped trading as a sole trader, then you will need to inform HMRC as soon as possible.
The cost for closing down your business will depend on your unique circumstances. The total will include any fees owed to creditors.
If you are a solvent business, then the cheapest way to cease trading is through a Voluntary Strike Off. This is completed through a DS01 form.
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Restart BTi
Suite 44 Dunston House
Dunston Road
Chesterfield
Derbyshire
S41 9QD
- 01246 959 388
- Fax: 03333 444 993
- Email: enquiries@restartbti.co.uk
Restart BTi is the trading name of Restart Business Turnaround Insolvency Limited, a limited company registered in England and Wales no: 11517419
Registered Office: Suite 42 Dunston House, Dunston Road, Chesterfield S41 9QD
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