Understanding the Costs of Business Dissolution

1. Understanding the Costs of Business Dissolution

In this guide, we explain how you can dissolve a limited liability company and discuss when this is the right and not the right way to terminate your business.

Company dissolution, also known as "dissolution" or "deregistration", is the process of removing the officially registered name of your limited liability company from the Registrar of Companies. Once the company name is removed from the register, the company ceases to exist legally.

2. What is the difference between company dissolution and liquidation?

Dissolution is often confused with another method of closing a business: liquidation. However, the two processes are very different in terms of how they are administered, when they can be used, and their costs.

Dissolution can only be used to close a business that has no debt or has fully repaid debts. Liquidation is a method used to close a business with large insolvency or substantial assets to carry before the business closes.

3. Dissolution criteria

The voluntary dissolution process can only be used to close a limited liability company if certain conditions apply. Include:

The company is solvency and can pay off all debts and outstanding debts within 12 months
The company has not traded for at least three months
The company has not changed its name in the past three months
No proposed or pending legal action against the company
The company has not sold any assets or rights belonging to the company in the past three months
You can see all requirements for voluntary deregistration of companies in section 1004/1005 of the Companies Act 2006.

4. What should I do before closing my business?

To begin the dissolution process, you need to complete the DS01 delisting request form. Before you can do that, however, you need to take some steps to get your business ready.
(1) Stop trading

The company cannot be dissolved if you have traded at any time in the last three months. Once you have determined the downtime date, you must complete all outstanding work and collect all payments due.
(2) Notify affected parties

You must notify anyone interested in your business (employees, creditors, shareholders, customers, etc.) of your decision to dissolve the company.
(3) Redundancy of personnel

One of the most difficult parts of the process for active companies is terminating a company employee's contract. You must pay employees their final salary plus any money owed to them for leave and severance benefits, etc.
(4) Sale of assets and shares of the company

You must recognize all assets and inventory owned by the business and divide the proceeds among the shareholders or use it to pay off outstanding debts. Any assets remaining in the company will become the property of Crown upon its dissolution.
(5) Prepare your final account

Prepare your final accounts and business tax returns and submit them to Company House and HMRC respectively. You must clearly indicate that these are your final accounts.
(6) Settlement of tax debt

Pay any outstanding PAYE, National Insurance and Company Taxes and ensure that any late payment or late payment penalties you receive have been resolved with HMRC.
(7) Decline of corporate tax

If your business is registered for VAT, you must opt ​​out by completing VAT Form 7, preparing a final VAT return and paying any amounts due. You should also ask HMRC to close the company's payroll system.
(8) Termination of the contract and closing the company's bank account

The final step in preparing for business dissolution is to terminate monthly services such as utilities, transfer website domain names, and close the business bank account.

5. How Much Does it Cost to Dissolve a Company?

The unsubscribe app itself costs just £10 for Companies House. If the company has assets, the voluntary liquidation procedure of the members is a legal obligation that will incur costs depending on the complexity and time limit of asset liquidation. Our prices start from £4000 including VAT If the company is in debt and needs to be liquidated through voluntary liquidation of its creditors, the costs will again vary depending on the complexity of the case. A small limited liability company can have liquidation costs between £4,000 and £5,000 VAT. If the directors do not have it, the director's severance pay can be used to fund the liquidation. 

6. You need advice?

If you are considering closing a limited liability company but are unsure of the best approach to take, we can help. Our team of licensed insolvency specialists will be happy to answer your questions and explain the options available to you, including dissolution and liquidation. Contact us today for a free, optional consultation.

Q&A

Question 1: What is the general meaning of "dissolution" in various contexts?

Answer 1: "Dissolution" commonly refers to the process of ending or terminating something, which could apply to business entities, marriages, or chemical compounds, among other things.

Question 2: How does dissolution work in the context of a business partnership?

Answer 2: In a business partnership, dissolution involves the legal process of ending the partnership, which includes settling debts, distributing assets, and dissolving the legal relationship between partners.

Question 3: What is the procedure for dissolution in the context of a marriage or divorce?

Answer 3: Dissolution in the context of a marriage, also known as divorce, typically involves filing a petition, division of marital assets and debts, determining child custody and support (if applicable), and obtaining a court decree to legally end the marriage.

Question 4: In the field of chemistry, what does "dissolution" refer to?

Answer 4: In chemistry, "dissolution" refers to the process of a solid substance becoming dispersed or dissolved in a liquid or gas to form a homogeneous solution. It is often related to the dissolution of solutes in solvents, like sugar in water.