What is a dormant company?

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Hi there

Can anybody tell me what a dormant company is? An accountant friend mentioned that opening a dormant company might be beneficial to me in order to make sure nobody uses a company name I’m keen on. What exactly is a dormant company? Like, how does it work?

Thanks

Answers

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A dormant company is a limited company that has been incorporated (registered) at Companies House but has no significant accounting transactions to enter into its accounts. Significant accounting transactions include any kind of business activity, such as:

  • Receiving income, including start-up capital and bank interest
  • Spending money through the business bank account, including bank charges and fees
  • Paying employees or service providers, including the company director and accountant
  • Buying and selling goods and services for business purposes
  • Buying or renting property or equipment

The only transactions that can go through the business bank account without jeopardising the company's dormant status are:

  • Payment for shares taken by the first shareholders (subscribers to the memorandum)
  • Filing fees for Companies House, but not incorporation fees
  • Late filing penalties from HMRC

A dormant company can be set up for many reasons, including protecting a company name, or reserving a name for later use whilst the business is being set up. Companies can also become dormant after a period of trading - this could be for any number of reasons, such as restructuring of the business or the death of the owner.

a year ago
 

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