What is a dormant company A company is considered dormant if it has had no 'significant accounting transactions' during the accounting period. A ‘significant accounting transaction’ is one which the company should enter in its accounting records.
What is the difference between a non-trading company and a dormant company? A company can be non-trading in the sense that it isn't doing business. But it may still have other accounting transactions going through its books, which means that it is not dormant in a legal sense. The term dormant applies to a company that, in legal terms, has no significant accounting transactions during a financial year.
Why would you need a dormant company?
There are several reasons why small business people may use a dormant company.
- Protection - You may have a trademark or brand name you wish to protect. Securing a dormant company of “brand name limited” will prevent competitors from using the same brand name for dishonest reasons.
- Future Proofing - You may not yet be ready to take a new project. By securing a dormant company, you can help prepare in advance for the future.
How long can a company remain dormant? There is no time limit for keeping the status of a company as dormant. However, the directors of dormant companies must perform some administrative duties each year.
What transactions are allowed?
Dormant companies are allowed to have a few specific allowable transactions, but no accounting transactions.
Transactions regarded as allowable for the company to retain its dormant company status are:
- The amount received by the company in respect of the first shares issued to the memorandum of association
- Fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
- The annual filing fee payable to companies house and fines and penalties issued by companies house for non filing of the annual return.
Can I buy a dormant company? Yes, you can reserve a company name just for £99 per year.