As your business gets off the ground and your reputation grows your business’ name becomes one of your most valuable assets.
A dormant company is one that is not trading and has no accounting transactions, but when you form a dormant company it means that no-one else can form a limited company with the same name. That’s why, even if you don’t intend to trade as a company right now, dormant company ownership can be a useful way of safeguarding the interests of your business.
Here we look at how this works in practice. We cover what’s involved in maintaining a dormant company, with a view to protecting your business identity. We’ll also consider what happens when a dormant company becomes active and what this means for your business’ name.
How can a dormant company ownership help to safeguard my business name?
For one, you may be trading (or intend to trade) under your own name and forming as dormant beneath it will help to safeguard it. Alternatively, you may have opted for a title that’s not connected directly with your personal identity, but perhaps refers to your product or brand. Either way, a well-thought-out name will set you apart from the crowd and avoid any confusion in the minds of customers.
Even if you intend to stay as a sole trader for the time being registering a company with the same name as your business prevents an identical name being registered by anyone else. Here’s why you might consider it:
- It can help to warn off would-be imitators – and by doing so, can help prevent costly disputes further down the line.
- It’s easy to set up via a speedy and efficient online process, without having to get accountants or solicitors involved.
- The admin and costs involved in keeping a dormant company going are modest. Each year you are required to file an annual return. Companies House provides a streamlined form for dormant companies that have never traded and the online filing fee is £13. You are also required to submit dormant company accounts. This can be done online, free of charge and as there are no transactions to log it’s a straightforward process.
- Providing you continue to meet your filing obligations the company can remain dormant and other people can be stopped from registering that company name indefinitely.
What happens when I want to activate the dormant company?
When you feel the time is right to start operating your business under your dormant company you are required to take the following steps:
- Within 3 months of the company carrying on any kind of business activity, you must notify HMRC.
- Send your account to Companies House within nine months of your company’s year-end.
- Within 9 months and 1 day of your company’s year-end, you need to pay any Corporation Tax due.
- Within 12 months of your company’s year-end, you need to send a Company Tax Return. This includes your statutory accounts, to HMRC.
You will have been sending accounts to Companies House each year while your company was dormant. Once you switch from dormant to active, the reporting dates for your annual returns and accounts will remain as they were. That is, they will not change. The change of your company’s status will be made known to Companies House when they see your annual accounts. As such, there is no need to contact Companies House specifically to notify them once you switch your company’s status from dormant to active.
Using ‘Limited’ or ‘Ltd’
So far as your name is concerned you are required to make it clear that your business is now operating as a limited company. This applies to all stationery and promotional material such as letters, order forms invoices and your company’s website.
The ‘Limited’ or ‘Ltd’ assignation needs to be clear. Let’s say your business is ‘[Your Name] IT Solutions’. To protect that business name you registered a company in the name of ‘[Your Name] IT Solutions’. Once you start using the company to trade under you need to make it clear that the full and proper name of your business is now ‘[Your Name] IT Solutions Limited’.
So, does that mean that you have to change your logo? As well as each and every reference to your name on your website? Not necessarily. Take your letters and invoices, for instance. You can leave your logo as it is provided that elsewhere, on the same document, your company’s full name is given. You are also required to show your company’s registered number, the registered office address and where the company is registered. And if you list one director, you must list them all.
On your website, your ‘About Us’ and ‘Contact’ pages will need amending. It’s best practice to include full company information at the bottom of each page.
Unless your business is run from home you must also display a sign showing your full company name at your registered address and at whatever premises your business operates.
Maintain your identity: even when your business structure changes
Owning a dormant company can allow you to switch seamlessly to trading as a company when the time’s right, without having to re-brand your business.
Care should be taken to keep on top of your filing requirements whilst the company is dormant. As well as financial penalties, failure here can result in the company being struck off the register. Whilst it’s possible to restore a dissolved company it’s much less straightforward than merely switching from dormant to active. Fortunately though, with online filing maintaining a dormant company need not be a hassle.