The steps you will need to take to close your business will depend on your business structure.
How do I stop being a sole trader?
If you operate as a sole trader you are self-employed. The process of stopping being self-employed is easier and more straightforward than closing a business. Generally, you must inform HMRC that you are stopping being a sole trader. If applicable, you must also complete the relevant tax returns, make the relevant tax payments and cancel any VAT registration. For more information, read How to stop being self-employed.
If you are unable to pay your debts as a sole trader (ie you are insolvent) you will need to follow an appropriate insolvency process. See ‘What if the business is insolvent?’ below for more information.
How do I end a partnership?
The process for ending a partnership depends on the type of partnership.
An ordinary partnership can generally be dissolved at any time by any of the partners. Ordinary partnerships may also automatically come to an end if:
they were created for a specific term or project which has come to an end
a partner dies or becomes bankrupt
a partner leaves without someone replacing them and buying their share of the business
A limited partnership can be dissolved in a way similar to ordinary partnerships. However, only general partners (as opposed to limited partners) can decide to dissolve a limited partnership. Further, the death or bankruptcy of a limited partner is not a ground for dissolution.
A limited liability partnership (LLP) can be ended by making an application to have it struck off the register and dissolved. This cannot be done if the LLP:
is insolvent (ie the LLP is unable to pay its debts)
traded or carried out any business in the 3 months before the application
changed its name in the 3 months before the application
sold anything in the previous 3 months that it would normally have sold in the course of business
An application can be made using form LL DS01 which must be signed by the majority of members and submitted to Companies House along with the relevant fees.
In all cases, the dissolution of the partnership must be made public (eg by writing to all customers and suppliers) and, depending on the terms of any partnership agreement, a Dissolution of partnership deed may be used to dissolve the partnership and distribute all assets and/or liabilities.
If a partnership is insolvent, an insolvency process will need to be followed. See ‘What if the business is insolvent?’ below for more information.
For more information, read Ending a partnership.
How do I dissolve a company?
A private limited company (LTD) can be dissolved either by applying to have it struck off the register or by passing a resolution of members’ voluntary liquidation (MVL).
To strike off a company, form DS01 must be signed by the majority of company directors and sent to Companies House along with the relevant fees. Note that a company cannot be struck off if it:
has traded within the last 3 months
has sold any stock within the last 3 months
has changed its name within the last 3 months
is threatened with liquidation
has any agreements with creditors (eg a company voluntary arrangement (CVA))
A company can be closed by way of MVLs by the directors:
making a declaration of solvency, signing the appropriate forms in front of a solicitor or notary public, and sending these to Companies House (for English and Welsh companies only)
completing form 4.25 (Scot) and signing it in front of a solicitor or notary public and sending it to the Accountant in Bankruptcy (for Scottish companies only), and
calling a general meeting of company shareholders within 5 weeks to pass a special resolution for the voluntary winding up of the company and the appointment of a liquidator
In both cases, the closure of the company must be communicated. If the company is to be struck off the register, a copy of the application must be provided to all those affected (eg shareholders and employees). For MVLs, the shareholder winding-up resolution must be advertised in The Gazette within 14 days.
For more information, read Closing a limited company and follow our Checklist for closing your company.
If a company is insolvent, an insolvency process will need to be followed. See ‘What if the business is insolvent?’ below for more information.
Ask a lawyer if you have any questions about closing a solvent business.