Usually the clients that I blog about are active companies, but this week I thought I would write about one of the dormant company clients that we have.
What is a dormant company?
A dormant company is a limited company that is registered with Companies House, but is not actively trading or receiving any income.
A company may become dormant for a number of reasons, it could be that the director wanted to reserve the name with Companies House before beginning to trade, it could be that a company which has been trading becomes dormant due to restructuring, ill health, a sabbatical or any other reason why they may not be trading.
A company can be dormant for any amount of time, however, during this time the directors will still need to file dormant company accounts and company directors are legally required to inform HMRC and Companies House in writing as soon as the company becomes dormant.
If a company is dormant they will not need a trading address, but they will still need a registered office address. This is the address that you provide to HMRC and Companies House for all your statutory legal notices to be sent to.
If your company is not trading many directors will not wish to link it to home address or a trading address of another business for reasons of privacy.
It is possible however to use a registered office address service from a virtual office provider to help keep home and work separate and to maintain privacy for the business owner.
The client that I am talking about here is a multiple business owner, he has several active businesses but has one which has been active but is no longer trading and he is now keeping dormant for a while. Why not just close down the company and start up again when he is ready? Well, for one thing it reduces the costs of administration – to close a company down and then open another at a later date does have costs attached. Making the company dormant is both a more straightforward administrative process and also reduces costs. It will then be simple for him to start up again when the time is right with a company that already has a trading history. Read here about restarting a dormant company.
A registered office address service is quite simple. The address of the virtual office is provided as the registered office address to both Companies House and HMRC. All the correspondence will be sent to the registered office address provider who will then forward the mail on to the company director at their home address.
Making a company dormant many not exactly be the entrepreneurs dream, but it is a useful and practical solution which is frequently used by business owners as a stop gap to moving forward.
If you know any business owners who may be looking to take a break for a while please do share this with them.