The process of closing your limited company legally will depend on whether your company is deemed to be solvent or insolvent.
A solvent company is one that’s able to pay its debts in full, within a reasonable timeframe. An insolvent company, on the other hand, is one that’s unable to pay its debts when they’re due.
If your company is solvent, you’ll be able to close it voluntarily by following the process set out for doing so. If your company is insolvent, you’ll need to follow a different process, which we’ll discuss here in this guide.
The process of closing your limited company legally can be a difficult and challenging task. The IRS has resources that can help you navigate this. On this page, you’ll find the steps you’ll need to take to close your limited company legally from a federal tax perspective regardless of your business type and information to help you take care of your employees. Whether a sole proprietorship, partnership or corporation, information on this page will help you understand what to file and how to report income you receive and expenses you incur before closure.
10 Process of Closing your Limited Company
There are a few key steps and process of closing your limited company legally. Here’s a summary of what you need to do:
- Notify IRS that you’re ceasing trading
- Seek shareholder agreement
- Settle any outstanding tax bills
- Pay any other debts owed by the company
- Tell your company’s creditors that you’re ceasing trading
- Tell Companies House that you’re striking off your company
- Notify other organisations that you’re no longer trading
- Let your company’s employees know
- Cancel any direct debits and standing orders
- Close your company bank account
1. Notify HMRC That You’re Ceasing Trading
One of the process of closing your limited company legally is to let IRS know that your company is ceasing trading. You can do this by logging into your personal tax account and following the on-screen instructions.
You’ll need to give IRS your company’s Unique Taxpayer Reference (UTR), as well as your National Insurance number.
2. Seek Shareholder Agreement
Another step is to check your company’s articles of association. These should set out the process you need to follow to close the company. In most cases, you’ll need to get shareholder agreement before you can start the process of closing your business.
If you’re the only shareholder, you can close the company without getting anyone else’s agreement.
3. Settle Any Outstanding Tax Bills
If your company owes any tax, you’ll need to make sure that this is paid off before you can close the business. This includes any Corporation Tax that’s due, as well as any VAT.
If you’re not sure how much tax your company owes, you can check this by logging into your personal tax account.
4. Pay Any Other Debts Owed By The Company
The next step is to make sure that all of the company’s debts are paid off. This includes any money that’s owed to suppliers, as well as any outstanding loans.
If you’re not sure of all the debts that your company owes, you can check your business bank statements and/or accounting records.
5. Tell Your Company’s Creditors That You’re Ceasing Trading
Once you’ve paid off all of the company’s debts, you need to let its creditors know that you’re ceasing trading. You can do this by sending a letter to each creditor, setting out the date that you’ll be ceasing trading.
6. Cancel Your EIN and Close Your IRS Business Account
The employer identification number or EIN assigned to your business is the permanent federal taxpayer identification number for that business. To cancel your EIN and close your IRS business account, you need to send IRS a letter that includes:
- The complete legal name of the business
- The business EIN
- The business address
- The reason you wish to close the account
7. Notify Other Organisations That You’re No Longer Trading
The final step is to notify any other organisations that you’re no longer trading. This could include your local authority, and any professional or licensing bodies.
You should also cancel any business insurance that you have, as well as any professional memberships.
8. Let Your Employees Know
If your company has any employees, you need to let them know that you’re ceasing trading. You should do this as soon as possible, so that they can start looking for alternative employment.
You’ll also need to make sure that any outstanding wages are paid, as well as any holiday pay that’s due.
9. Cancel Any Direct Debits And Standing Orders
The next step is to cancel any direct debits and standing orders that your company has. This includes things like utilities, insurance, and subscriptions.
10. Close Your Company Bank Account
Once you’ve cancelled all of the company’s direct debits and standing orders, you can close its bank account. You’ll need to contact your bank and let them know that you want to close the account.
