There are different types of companies available. A company owner can start a company depending on many things. The companies available can be classified into different types. This includes companies based on liabilities, companies based on members, and companies based on control. Here are some of the companies available:
- Private companies: a private company has articles that restrict the transfer of shares. A private company can have a minimum of 2 members and a maximum of 200 members. The members of a private company can all own shares at any given time.
- Public companies: members of a public company can freely transfer shares to others. For a public company, the minimum number of members it should have is 7. Public companies have an unlimited maximum number of members.
- Sole proprietorship: it is a company run by one person only. The good thing with a sole proprietorship is the owner of the company will enjoy all the profits alone. The company is also distinct from the owner making the sole proprietor separate from the company.
- Associate companies: an associate company influences another company. An associate company can have up to 20% of shares of another company. Associate companies have to be involved in the decision-making process of the other company.
- Government companies: this is a company where the government owns at least 50% of its shares. The central government or other government ventures can own the company. The main stakeholder of government companies is the government.
- Unlimited companies: in unlimited companies, the shareholder’s items have no limited liability. This means that if the company gets into debt, the company can use the shareholder’s items to pay off the debts.
- Limited companies: in limited companies, the liabilities of members are limited. The stakeholders of the company are responsible for paying the company’s debts depending on the capital the stakeholder invested.
These are some of the types of companies formed by business owners. In this article, we will discuss dormant companies, how they come about and what their purposes are.
A dormant company is formed but does not do any trading. Most company owners form dormant companies for future use. Dormant companies can be considered inactive since they do not conduct any trading activities.
For a company to be deemed dormant, the company owners need to visit the register of companies at Companies House and register the company from the start of the company. This will help Companies House to know that the company registered is dormant. A dormant company needs to be reported to HM Revenue and Customs. The HMRC will confirm the company is dormant and is not conducting any trading activities.
A company can become dormant if:
- A company wants to restructure a formerly active business. While this is happening, a company owner can decide to make the company dormant as the restructuring process is ongoing
- A company owner might want to take leave. If this happens, he or she might decide to make the company dormant since no trading activities will be conducted.
- A company can be made dormant if a company owner wants to reserve a company name. This can be because the company owner wants to relaunch a business and does not want someone else to take the selected name for the company.
- A company can be made dormant if its main purpose is to act as a holding company for assets. This means that the company will not conduct any trade or business while dormant.
As mentioned, a dormant company does not conduct any trading activities. The trading activities can include:
- Selling and buying of goods and services.
- Receiving dividend payments from stakeholders
- Paying dividends to shareholders
- Buying property
- A dormant company cannot employ members of the staff
- A dormant company cannot engage in trading activities like paying the directors’ salaries
A dormant company is still required to pay any Corporation Taxes that it might have made before becoming dormant. The owner of a dormant company should also make sure the VAT registration is canceled. Since a dormant company is not allowed to conduct any trading activities, the owner should make sure all the balances have been settled before the company is declared dormant.
Getting the annual return confirmation statement and dormant accounts from the Companies House is mandatory every year. The annual confirmation statement contains the following:
- The company’s name
- The directors’ details like their names and addresses
- The shareholders’ details
- The companies addresses
- The annual return confirmation statement should also have information about issued shares
- The location of the company’s statutory records should be made
- The information about the people with significant control in the dormant company
Once your company has been declared dormant, you should avoid opening a bank account for the company. If the dormant company had a bank account, the owner should close the bank account. This will help the company avoid any charges that the bank might give the dormant company. If the company owner does incur any charges from the bank, he or she will be forced to make the payments from their bank account.
If a company owner wants to make the dormant company active, he or she must go to HMRC if the company has started trading within three months. The HMRC will need statutory information like:
- The company’s name
- The company number
- Date of company activation
- The address of the company
- Nature of the company’s business activities
Once a company has become active, it will be required to pay the taxes an active company pays. An active company can seek the services of an accountant and tax advisor when it comes to making payments and tax decisions.