Closing Your Business

Mrs B Metcalf, Margate

"I was really worried about the cost of closing my nursery business. In the end I was entitled to over £11,000 redundancy from the government which paid for everything and left me enough for a holiday."

Limited Companies

The best way to close down a limited company will depend on whether the company is solvent or insolvent.

If your company has debts and is no longer viable then a Creditors Voluntary Liquidation (CVL) is likely to be the best way to close it down. During liquidation the company’s assets are sold and used to pay off creditors.

Any remaining debts will then cease to exist… provided they are not personally guaranteed. Liquidation is often the most appropriate way of dealing with company creditors.

If you are looking to wind up a company that is solvent and has assets over £25,000 then a Members Voluntary Liquidation (MVL) is probably the best way forward. The MVL should attract entrepreneur’s relief which means it is more tax efficient than simply dissolving.

Often shareholders can be paid within 7 days with the company itself completely wound up in less than 6 months.

If the company has reserves of less than £25,000 then the best option is normally dissolution. Any funds can usually be paid as a capital distribution (often a better option than dividends) before we apply for the company to be struck off.

At £10 dissolution is the cheapest way to close your company. To find out if you qualify why not complete our free 60 second test or call us on 0800 014 1486.

Sole Traders

Sole traders are personally liable for business debts so the options available are different to those of a company director.

Individual voluntary arrangements (IVAs) have become increasingly popular (13,917 in Q3 2016 alone) and allow you to repay what is affordable to your creditors (which may only be a small percentage of what they are owed) and continue to trade’.

Interest on any debts will be frozen and monthly payments reduced allowing you to trade out of debt and stop legal action.

If you own your own home then it (and other valuable assets) is much better protected in an IVA than bankruptcy. If you have over £10,000 of debt (this includes HMRC) and 2 creditors then an IVA could be the solution. Why not try our free 60 second test and see if you qualify.

If your business is losing money and no longer viable then an IVA is probably not the best course of action. It is unlikely that the monthly payments will be maintained and if you have no assets to protect then bankruptcy is probably the more sensible option.

Bankruptcy is often seen as the end of the world but in reality it is far less intrusive than it used to be and you will normally be discharged within 12 months. Bankruptcy brings certainty and can allow sole traders to wipe the slate clean and start again.

What's the best way to close your company? Try our free...

Case Study 1 – Security Services Company

Contracts had not been costed properly and the accounting system was non existent. The company was leaking money and when we scratched the surface it was clear that large debts had built up.

Case Study 2 – Builder

The downturn in the housing market saw a major change in fortunes for this company. Contracts disappeared and existing projects were scaled back. Having taken on employees and bought additional equipment during the housing boom this left the business in an impossible situation.

Case Study 3 – Florist

Like most businesses this limited company saw a fall in sales as the recession took hold. Flowers were seen as a luxury item and with money tight customers dried up. The bigger wedding and corporate buyers also began to spend less.