The simple answer to the question of what are dormant company accounts in the UK is that they do not exist. Every company has an accounting record and the same applies to the UK where most businesses record all their financial transactions in a company account. However there are some types of transactions that can be made with a dormant company account and some UK accounting firms are able to help with these types of transactions.
It should be noted that there are different types of company account and this includes both the permanent and the non-permanent type of company account. Some of the types of company accounts are linked to a particular business, whereas others will show up as active even though they are not. These are the types of accounts that most UK accounting firms are able to help with. Some businesses have more than one company account and when one is dormant it may still show up as active.
All Company Records
There are different ways to close company accounts and all of these have to do with the different laws that govern the closing of such accounts. If a company is dissolved there will need to be liquidation proceedings and all company records must be liquidated so as to pay off debts. A winding up petition can also be filed against an account and all company records will need to be found before the next petition can be filed. This process can take a few months but it will be worth it if the winding-up petition is not granted.
Most UK accounting firms can help with what are dormant company accounts and there are a few basic reasons as to why this is necessary. One reason is because some debts cannot be paid off through the normal methods that apply to standard debts. Sometimes a creditor can be convinced to accept a settlement that does not involve the full amount of the debt but the outstanding fees and costs can be rolled into the debt balance. It is also possible that company directors can be persuaded to sell off assets that are not being used to support the business. These types of transactions are referred to as liquidity transaction and records are maintained for tax purposes.
Dormant Company Accounts
What are dormant company accounts? Any company that has not been active for more than ninety days is considered to be in suspended status. Company directors who allow inactive companies to remain open are breaking the law and can be fined heavily. If company accounts that are ninety days old are not properly closed, they can remain in operation until the new period begins.
It is important to close what are dormant company accounts and to do it as quickly as possible. A company that is not actively growing may become ineligible for a loan during its second or third year of operation. A company that does not make a profit for three years may not be able to qualify for a line of credit or a lease. Some companies can remain open for longer than a year or two if the business makes a profit during those years. Once a company has closed, however, those operations are over and the company is not eligible to receive any loans or leases from any financial institution.
Accounting Principles And Federal Regulations
Most new businesses start out with just one or two company accounts. As the business grows and the company begins to hire employees, more company accounts can be added to the payroll. The company director should keep careful records of all company activity so that accounting can be done accurately. Keeping track of employee earnings and spending, along with company assets and liabilities, helps ensure that a company operates according to both the latest accounting principles and federal regulations.
There are many reasons that a company might need to look into what are dormant company accounts. One reason is that some loans require a company to have an active cash balance at the time that loan is made. Another reason is that a bank requires a company to close their account before giving that bank access to information regarding that company’s past. However, most banks will allow a company to remain open until the company account has been fully paid off. For small business owners who are either starting out or looking to expand their business, keeping good records on all company activity is a great way to ensure that the company operates according to all laws.