What is the cheapest way to close a limited company?

Closing a limited company in the United Kingdom is a decision often driven by various circumstances, such as financial challenges, changes in business direction, or retirement. Regardless of the reasons behind the closure, understanding the most cost-effective way to wind up your limited company is essential. In this article, we will explore several strategies and avenues to help you close your company while minimising the cost.

1. Striking Off the Company

Striking off involves voluntarily removing your company from the Companies House register, effectively dissolving it. This option is suitable for companies with no assets or liabilities.

Benefits:

• Low cost: The Companies House fee for striking off is relatively inexpensive.
• Minimal paperwork: The process involves submitting a form and notifying relevant parties.
• No need for insolvency proceedings: Striking off is suitable for solvent companies.

Considerations:

• Eligibility: Your company must meet specific criteria to be eligible for striking off.
• Outstanding obligations: Ensure all debts, taxes, and liabilities are settled before initiating striking off.

2. Members' Voluntary Liquidation/MVL

If your limited company is solvent and you wish to distribute its assets to shareholders, opting for an MVL can be a tax-efficient way to close the business. In an MVL, a liquidator is appointed to realise the company's assets, pay off its debts, and distribute the remaining funds to shareholders.

Benefits:

• Tax efficiency: MVL can provide tax advantages, especially for shareholders.
• Formal closure: It offers a structured and legally recognised process to wind up the company.
• Creditor protection: Ensures that creditors are paid in full before distribution to shareholders.

Considerations:

• Costs: MVLs involve professional fees for the liquidator's services.
• Solvency requirement: The company must be solvent to use this method.

How much does Parker Walsh charge for an MVL? View our prices

Learn more about Member's Voluntary Liquidation
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3. Creditors' Voluntary Liquidation/CVL

For insolvent limited companies unable to meet their financial obligations, a Creditors' Voluntary Liquidation (CVL) is the appropriate route. This process involves appointing a licensed insolvency practitioner (like Molly Monks) to carry out the liquidation and distribution of assets to creditors.

Benefits:

• Legal process: Provides a formal and regulated way to handle insolvency.
• Protection for directors: Demonstrates a responsible approach to creditors.

Considerations:

• Costs: CVLs involve professional fees for the insolvency practitioner. Parker Walsh's fee starts from £4,000 plus VAT.
• Impact on directors: Directors may face personal liability for any wrong doing.

How much does Parker Walsh charge for a CVL? View our prices

Learn more about Creditors' Voluntary Liquidations

4. Dissolution by Striking Off vs. Liquidation

Choosing between dissolution by striking off and liquidation depends on your company's financial health. Solvent limited companies can opt for striking off or MVL, while insolvent ones may need to proceed with CVL. The decision should be made in consultation with a licenced insolvency practitioner, such as Molly Monks of Parker Walsh.

Conclusion

The cheapest way to close a limited company in the UK varies depending on your company's financial status, assets, and liabilities. Striking off is a cost-effective option for solvent companies with minimal obligations, while MVL provides tax-efficient closure for solvent businesses. In contrast, CVL is appropriate for insolvent companies, offering a structured process for handling debts.

Seeking professional advice from an insolvency practitioners like Molly Monks is crucial when considering company closure. Their expertise can help you navigate the legal requirements and financial implications, ensuring a smooth and cost-effective dissolution of your limited company while complying with UK regulations.

What if you cannot afford an insolvency practitioner?

If you are unable to afford an insolvency practitioner for liquidating your limited company, options such as voluntary strike-off, negotiating with creditors, and seeking advice from debt charities can provide temporary relief. Ultimately, however, the expertise and legal compliance ensured by an Insolvency Practitioner make them worth the investment.

Have a read of our article for more information and to discover your options.

Liquidation Frequently Asked Questions

We've put together a list of the most commonly asked questions around liquidation. If you would like to discuss any aspect of this area, please contact us and one of the team will get in touch.

What is the cheapest way to close a limited company?

To close a limited company cost-effectively, consider striking it off the Companies House register, provided you meet eligibility criteria and have no outstanding liabilities. If it doesn’t meet eligibility criteria then Liquidation should be considered.

How do I go about closing a Ltd company?

To close a limited company, you can apply for voluntary dissolution through Companies House, ensuring all legal obligations, including settling debts and taxes, are met. Or place the company into Liquidation.

Can a dissolved company still conduct business?

No, once a company is dissolved, it ceases to exist legally and cannot operate or conduct any business activities.

What's the most cost-effective way to liquidate a company?

Voluntary liquidation, initiated by the company's directors and shareholders, can be the cheapest way to liquidate a company, subject to meeting certain criteria.

How can I close a limited company without incurring tax liabilities?

Closing a limited company without tax liabilities involves settling all outstanding taxes and debts before initiating the dissolution process.

Where can I find an affordable insolvency practitioner?

You can search for insolvency practitioners through professional bodies or directories, comparing fees and services to find an affordable option. Be wary of some practitioners’ fees. The fees can often be complicated with hidden extras. Parker Walsh have an up-front, straight forward fee structure, so you will always know how much you will be paying.

How much does it cost to close a limited company?

The cost of closing a limited company varies depending on factors like the method chosen for dissolution, outstanding debts, and professional fees.

How do I close a limited company with outstanding debts?

Closing a limited company with debts involves settling outstanding liabilities either through repayment, negotiation, or seeking professional advice to manage the situation legally and ethically.