Closing Down a Limited Company

Closing down a business is caused by several reasons. A business owner can close the business if he can no longer keep the business going.

However, it is important to know how to close down a limited company.


When planning to close down a limited company or any kind of business the first step to take is to start the liquidation process. You should hire a liquidator to do the job as it is not an easy one. Liquidation is a legal process used in settling all the affairs of the company in case the owner decide to stop the operation. Through this operation it would be easier to identify the creditors owed to be paid. There are three basic types of liquidation that a business owner should understand. One is voluntary liquidation of the member, voluntary liquidation of the creditor as well as the compulsory liquidation. When the company has enough assets and has the capability to settle all the debts the type of liquidation to employ is called member’s voluntary liquidation. On the other hand, in case the shareholders request for liquidation due to the inability to pay the debts a creditor’s voluntary liquidation can be performed. Moreover, the court can order compulsory liquidation in case of a petition filed by creditors of the company. The court hires and pays the liquidator and reimburses all the expenses once the assets f the company is sold.


On the other hand, there is an alternative to liquidation that is the dissolution. This is another method that can be used when closing down limited company. This is cheaper and simpler as compared to liquidation. However, this is only possible for companies that do not have debts to repay. Nevertheless, for companies that are insolvent dissolution is also ideal. It is important to keep in mind that all the credits should be paid before the business is dissolved. In case the company had bought equipment or vehicle but not yet fully paid, the company should contact the supplier to establish other options to settle the agreement.

Aside from paying the debts from all creditors, before the company can close down the business it is required to pay the final payroll of all the employees. A final set of account should be prepared and it is the responsibility of the company to inform the HM Revenue & Customs about the cease of operation of the company. In this way, the taxable income will be stopped yet if the company has outstanding taxable income the concerned agency will object about the closure.

Therefore, closing down a limited company does not mean that the procedures can be dealt with immediately. Usually, the procedures take few weeks or months before settling everything. The company can also choose to leave the business dormant and can be used again in the future.


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