Using Dormant Companies

There may come a time when you decide you want to register a company, but do not wish to begin trading yet.

This is what’s known as a dormant company and there are various reasons why you may wish to set up a dormant limited company.

First let’s establish…..

What is a Dormant Company?

The first thing to ask is what exactly is a dormant company? In short, it’s simply a company registered with Companies House that is not currently trading.

This means that the company cannot be engaged in business and must not be carrying out any significant transactions in or out of the business.

It will still remain registered as a limited company and no new companies will be able to be formed using the same name.

In this respect dormant companies are very much the same as an active company, but it should not be confused with a dissolved company which is one that has ceased trading with no intention to recommence activity.

Why Register a Dormant Company?

There are several reasons why someone may wish to register a dormant company, mainly:

To Protect a Trading Name

This should not be confused with trademark protection.

All that registering a dormant company will do is prevent anyone else from registering a company with the same, or a very similar, name.

This means it cannot be used to stop others from passing off as your brand.

To Reserve a Company Name for Future Use

Many companies like to register formant companies in names they may wish to use in the future. For instance a new brand may be currently trading under the name of the larger company but, at some point may be successful enough to justify becoming a stand alone company.

By registering a dormant company you are ensuring you can use that company name in the future as soon as you are ready.

What are the Requirements for Dormant Companies?

Naturally, as they are not actively trading, there are few documents that need to produced each year to maintain a dormant company. However, this does not mean that they do not require any maintenance.

Whilst full annual accounts do not need to be prepared you will still need to submit an abbreviated balance sheet and notes each year. These must be submitted by the same deadlines that full trading companies must comply with.

Dormant companies must also still submit annual returns and still notify Companies House to any changes in directorships or shareholders.

Full details on the requirements for dormant companies can be found on the Companies House website.

Because of these requirements, you should only look to form a dormant company if you really need to – it is not something to do just for the sake of it.