Sometimes a business owner decides to close down a limited company. They may be tired of running a business that is not very profitable, or it may have been doing nothing and sitting dormant for a period of time. It is also possible that the entrepreneur wants to devote time to another business that is more profitable. Whatever the reason, it is not always easy to close down a limited company. In the UK, anyone who wants to begin a limited company needs to spend only hours setting it up. They will pay very little to do this, unlike other European countries where it takes much longer is far more expensive. If they decide to close it down, it is not always as simple. Companies often go through a liquidation process to do this.
The way that liquidation takes place depends on whether the company's assets are sufficient to pay any money due to creditors. If a business has been operating in the green and has either no outstanding debts or enough assets to pay them, they may begin a voluntary liquidation process. Sometimes, when a company owes creditors, they may call for a voluntary creditor's liquidation. In this case the owners may decide to go along with the plea and liquidation. In this case, the business does not have adequate funds to pay all of their debts, so the creditors hire a liquidator to sell their assets. The creditor or creditors are then paid the amount owed from the profits of the sale. If a business owes creditors who go to court to get a liquidation order so that they can be paid, this is referred to as compulsory liquidation. In this case, assets must be sold to pay their debts.
An easier way for a limited company to close down is usually only for businesses that do not have debts. This method is called dissolution, and it is usually easier to do and costs much less than liquidation. The way it works is that the company stops doing any form of business. They pay all of their debts, including loans from shareholders. The company should contact any creditors concerning business equipment that they have purchased through leases or financing to make arrangements to end their contract early. They should also notify their employees of the imminent closing of the company and take care of the paperwork associated with the final payroll. After making sure that all of the company's bookkeeping is in order, they simply notify the tax office that they are no longer in business. Then, after three months pass that they have been closed down, the company may apply for dissolution.
Not every limited company needs to go through the liquidation process to end their company. There is also the possibility of dissolution. If the business is debt-free, dissolution is usually a very good solution that is easier than liquidation. It also costs far less because there is no liquidator to pay. The proper steps need to be follows to make use of this solution, and the limited company can be closed down in around three months. After the company stops doing business, and all of the loose ends are tied up, they must wait for three months. At that time, the owner simply applies for dissolution of the limited company.
Dissolution is not a choice for limited companies that owe creditors who want their money. In these cases, liquidation is almost always necessary either in the form of a voluntary liquidation or a creditors' liquidation. The matter moves into the courts when the limited company is not able to pay creditors in most cases. A formal hearing initiates the liquidation process in which all assets are sold. The profits are then distributed to creditors, but in many cases, there is not enough cash available to pay everyone. The limited company is insolvent and may no longer do business. Some limited companies have made use of the counseling available for small businesses in the UK that are struggling. Unless the closing down of a business is voluntary, it is best to seek the help of these counselors before the situation becomes one that cannot be easily remedied.
The way that liquidation takes place depends on whether the company's assets are sufficient to pay any money due to creditors. If a business has been operating in the green and has either no outstanding debts or enough assets to pay them, they may begin a voluntary liquidation process. Sometimes, when a company owes creditors, they may call for a voluntary creditor's liquidation. In this case the owners may decide to go along with the plea and liquidation. In this case, the business does not have adequate funds to pay all of their debts, so the creditors hire a liquidator to sell their assets. The creditor or creditors are then paid the amount owed from the profits of the sale. If a business owes creditors who go to court to get a liquidation order so that they can be paid, this is referred to as compulsory liquidation. In this case, assets must be sold to pay their debts.
An easier way for a limited company to close down is usually only for businesses that do not have debts. This method is called dissolution, and it is usually easier to do and costs much less than liquidation. The way it works is that the company stops doing any form of business. They pay all of their debts, including loans from shareholders. The company should contact any creditors concerning business equipment that they have purchased through leases or financing to make arrangements to end their contract early. They should also notify their employees of the imminent closing of the company and take care of the paperwork associated with the final payroll. After making sure that all of the company's bookkeeping is in order, they simply notify the tax office that they are no longer in business. Then, after three months pass that they have been closed down, the company may apply for dissolution.
Not every limited company needs to go through the liquidation process to end their company. There is also the possibility of dissolution. If the business is debt-free, dissolution is usually a very good solution that is easier than liquidation. It also costs far less because there is no liquidator to pay. The proper steps need to be follows to make use of this solution, and the limited company can be closed down in around three months. After the company stops doing business, and all of the loose ends are tied up, they must wait for three months. At that time, the owner simply applies for dissolution of the limited company.
Dissolution is not a choice for limited companies that owe creditors who want their money. In these cases, liquidation is almost always necessary either in the form of a voluntary liquidation or a creditors' liquidation. The matter moves into the courts when the limited company is not able to pay creditors in most cases. A formal hearing initiates the liquidation process in which all assets are sold. The profits are then distributed to creditors, but in many cases, there is not enough cash available to pay everyone. The limited company is insolvent and may no longer do business. Some limited companies have made use of the counseling available for small businesses in the UK that are struggling. Unless the closing down of a business is voluntary, it is best to seek the help of these counselors before the situation becomes one that cannot be easily remedied.
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