A dormant company is a company that is not taking part in any trading activity and has no form of income. A previously trading company can become dormant or a company can be set up as dormant. In this post, we will focus on the latter and show you how to set up a dormant limited company, and then what you need to do to maintain dormant status.
Why set up a dormant company?
There are two main reasons why you may wish to set up a dormant company:
- To stop anyone else from taking the company name – Companies House does not allow duplicate names to exist on the register. If you are a sole trader, you could set up a company with no intention of trading with it, just to stop anyone else from taking your business’ name.
- To establish a business (even if you aren’t ready to trade) – You may intend to trade as a limited company, but simply aren’t prepared yet. In this instance, you can register the company as dormant to reserve the name for when you are ready.
Setting up a dormant company
The process for setting up a dormant company is the same as setting up a company that will be trading, barring one detail regarding SIC codes, which we’ll cover below.
With Quality Company Formations, you can set up a dormant company in a few simple steps:
1. Choose your company name
Your company needs a name, even if you have no plans to trade yet. This must be unique, can’t be too similar to another currently on the register, shouldn’t be offensive, and must end with ‘Limited or ‘Ltd’.
Moreover, Companies House maintains a list of sensitive words and expressions. If any of these are included within your company name, you must seek written approval from a specific body (depending on the word or expression) to use the name to accompany your application. For example:
- If your company name included the word ‘Bank’, you would need permission from the Financial Conduct Authority
- If your company name included the expression ‘Health Service’, you would need permission from the Department of Health and Social Care
You can check the availability of your proposed company name (or find out if it includes any sensitive words and expressions) with our name search tool.
2. Pick your company formation package
We offer several company formation packages dedicated to registering a private company limited by shares (the most popular form of company in the UK):
3. Select your extras and make payment
At the checkout, you will have a chance to add some additional extras to your order that were not included in your package. For example, if you want your company formed on the same day, you can select our Guaranteed Same Day Service. Or, if you want to ensure your company is fully compliant with GDPR, you could add the GDPR Compliance Package.
When you’re ready, you need to provide us with your email address, password for your account, and billing details. You can then proceed to make payment (we accept the majority of payment cards).
4. Provide your company information
We will then guide you through the online process of setting up a dormant company. This includes providing the following information:
Standard Industrial Classification (SIC) Code
The SIC Code is used to notify the government of the types of businesses that are being incorporated. We will provide you with a list of codes, and all you need to do is select one to four codes that are appropriate for your company.
As a non-trading company, you should select ‘99999’ – the dedicated code for dormant companies. You can then add up to three more codes if you want.
Registered Office Address
All companies must provide a UK-based registered office address. This is the company’s official address – although, no trading activity needs to take place at the address – and where government bodies such as HMRC, Companies House, and the Information Commissioner’s Office (not an exhaustive list) will send their correspondence.
Using a residential address as a registered office address is allowed (if the landlord grants permission). However, this is not recommended, as the address is placed on the Companies House public register, which makes you vulnerable to unwanted visitors and potential fraudulent activity.
A non-residential address is the best choice. With the exception of PO Boxes, you can use any type of non-residential address postal address that satisfies the new ‘appropriate address’ rules in the Companies Act 2006.
A number of our packages include the option to use our central London address as a registered office address. If the package you purchased did not include this facility, you will have the option to add the service during the company formation process.
Director details
Directors take care of the running of a company. You can set up a dormant company with one director or multiple directors – it’s up to you. For every director that you appoint, you must enter their:
- Title
- Full name
- Date of birth
- Nationality
- Occupation
- Service address – this is viewable on the Companies House public register (a number of our packages allow you to use our address as the service address)
- Residential address – this is not viewable on the public register, unless it is also being used as a registered office address or service address
Shareholder and share information
Shareholders own the company. You can set up a dormant company with one shareholder or multiple shareholders. Shareholders can also be directors. For every shareholder that you name, you must enter their:
- Title
- Full name
- Date of birth
- Nationality
- Occupation
- The answers to three security questions (such as town of birth, last three digits of phone number, and father’s forename)
- Service address – this is viewable on the Companies House public register (a number of our packages allow you to use our address as the service address)
- Residential address – this is not viewable on the public register, unless it is also being used as a registered office address or service address
- Total number of shares held
- Currency of shares held
- Value of shares held
- Particulars associated with shares held
The share split in the company defines the percentage that they own. For example, if naming only one shareholder, they will own 100% of the company, regardless of the number of shares you allocate to them. If naming two shareholders, provided that they both have the same number of shares, they will own 50% of the company each.
As the owners of the company, shareholders are the people who are financially liable if the company accrues debt. However, this liability is limited to the unpaid nominal value of the shares that they hold. Because of this, we recommend allocating a low number of shares with a low value, such as one share worth £1.
If you have multiple shareholders with differing levels of ownership, allocate a low amount of shares with a low value, whilst still representing the split. For example, if you want a 75% / 25% split, allocate three shares to shareholder A and one share to shareholder B.
Person with significant control (PSC) details
PSCs are the people who have ultimate power within the company. They are typically also shareholders within the company. To set up a dormant company, you generally need to name at least one PSC. For every PSC, you must enter their:
- Title
- Full name
- Date of birth
- Nationality
- Occupation
- Service address – this is viewable on the Companies House public register (a number of our packages allow you to use our address as the service address)
- Residential address – this is not viewable on the public register, unless it is also being used as a registered office address or service address
- Nature of control information – we will provide you with a series of dropdown options, you simply select the appropriate ones
The articles of association
The articles of association is an internal document that sets out how the company is going to be run. We have prepared a set of articles of association that are appropriate for dormant companies, so you don’t need to do anything regarding this.
Review your information
Once you have provided all of the necessary company information, you simply need to review the company details, checking for any mistakes. When you are happy, you can submit the application.
All of our company formation packages include a Free Pre-Submission Review. This means our team of experts will also review your application before it’s sent for processing at Companies House. If our team sees any errors, they will work with you to fix them. If there are no problems, the application will then go to Companies House.
Your dormant company will typically be set up within 24 hours. As soon as it has been registered, we will send you an email containing your key company information, including your company registration number, company authentication code, digital certificate of incorporation, and digital share certificates.
5. Let HMRC know that the company is dormant
Your company will now have been set up, but a vital step of the process is notifying HMRC that it is dormant. Failure to do this will result in HMRC assuming that your company must file a Company Tax Return and pay Corporation Tax.
Within a few weeks of your company being formed, HMRC will send a letter to your registered office that includes your Unique Taxpayer Reference (UTR). Once you have received this letter, you should let HMRC know that your company is dormant for Corporation Tax through this online form.
It is also a good idea to let the Information Commissioner’s Office (ICO) know your company is dormant through this online form. This should stop the ICO from chasing you up regarding registering with them.
Once you have followed these steps, you will have set up your dormant company.
How to maintain your dormant status
Maintaining dormant status is an ongoing process. To do this, you must first ensure your company doesn’t partake in any trading activity. After this, you must:
File an annual confirmation statement – This is a report made up of basic company information. This is due approximately two weeks after the anniversary of your company’s incorporation, and then must continue to be delivered on an annual basis, regardless of whether your company is trading or not.
As mentioned, a number of our company formation packages come with the facility to have us file your confirmation statement for you. This service can also be purchased separately.
File dormant company accounts – All companies (regardless of trading activity) must file annual accounts, with the first set needing to be delivered 21 months after incorporation. Subsequent accounts should then be delivered 9 months from the accounting reference date.
Dormant companies can file a specialist set of accounts known as Dormant Company Accounts. Whilst not included as part of any of our company formation packages, you can purchase our Dormant Company Accounts Service separately as and when you need to file them.
If your company starts trading
When your company starts trading, you should notify HMRC within 3 months of your trading activity starting. Otherwise, if your company continues to be dormant, you should carry on delivering the confirmation statement and annual accounts when they are due.
That’s how to set up a dormant company
Thanks for taking the time to read this post. We hope you have found it useful. If you have any questions about the set-up process or keeping a company dormant, please leave a comment and we’ll get back to you as soon as possible.
