How to close your company: a founder's guide to strike-off or liquidation

Not every startup ends in a big exit. Sometimes, the right move is to wind things down and move on.

Whether you’re closing because things didn’t take off, or because you’re onto something new, it’s important to shut down the company properly – for your investors, for HMRC, and to stay legally compliant.

In this article, we’ll explain the main ways to close a UK limited company, and which is the best option for you.

What are your options for closing a company?

There are three main ways a UK limited company can be shut down:

1. Strike-off: If the company is solvent and has not traded in the last 3 months, you can apply to remove it from the Companies House register.
2. Members’ voluntary liquidation (MVL): This is used when the company is solvent and has a lot of money or assets. It’s a formal process to close the company and return money to shareholders.
3. Creditors’ voluntary liquidation (CVL): This is for companies that are insolvent. It’s a way to close the business and deal with what is owed.

When can you strike off your company?

If your company is solvent, you can apply for strike-off if:

• It hasn’t traded or sold any stock in the last 3 months
• It hasn’t changed its name in the last 3 months
• It’s not involved in any legal disputes
• It’s not subject to insolvency proceedings
• It has no outstanding debts or agreements with creditors

If you meet these conditions, strike-off is likely your best route. That’s because it’s the easiest and cheapest of the three options (we’ll go over how you actually do it below).

It’s meant for companies that aren’t trading and have tied up all their loose ends. So, if you still have debts, disputes, or recent trading activity, you’ll need to consider MVL or CVL.

When is a Members’ Voluntary Liquidation the better option?

If your company is solvent, and still has a lot of money or assets – typically over £25,000 – it might be better to close through a Members’ Voluntary Liquidation (MVL) instead of using strike-off.

That’s because money taken out through an MVL is usually taxed as capital gains (normally 18% or 24%) rather than regular income tax (which can be up to 45%). You might also qualify for something called Business Asset Disposal Relief, which can bring your Capital Gains Tax down to just 14%.

But MVL is a longer, more formal process that requires hiring a licensed insolvency practitioner. Since you’ll probably have to pay somewhere between £3,000 and £5,000+ in fees, it’s only worth doing if you’re taking out a big amount of money as you close the company.

What if the company is insolvent?

If your company has debts it can’t pay, you can’t strike it off or use MVL.

Instead, you’ll need to:

• Initiate a Creditors’ Voluntary Liquidation (CVL), led by a licensed insolvency practitioner.
• Prepare a “statement of affairs” listing the company’s assets and liabilities.
• Notify shareholders and creditors via The Gazette and a decision procedure (e.g. virtual meeting or written correspondence).
• Hand over control of the company to the liquidator.

This is a much more time-consuming and expensive process (you’ll have to pay thousands in insolvency practitioners’ fees).

Occasionally, if the company has no assets and it’s unlikely that creditors will take action, you can still try to strike off the company. But creditors can object and stop the process, so it’s a risky route.

Can I just make the company dormant?

Yes. If you’re not ready to shut the company down permanently, you can make it dormant.

To do this, you’ll need to:

• Stop business activity takes place
• Cancel VAT and payroll schemes
• Submit dormant accounts and annual confirmation statements to Companies House
• Notify HMRC that trading has stopped (or simply stop trading and file tax returns showing no activity)

This option essentially lets you “pause” the company and restart trading later, though you’ll still need to do some basic filings.

Which route should you take to close your company?

If you’re not sure which option is right for your company, this flowchart breaks down the different routes based on your company’s financial position and what you want to achieve.

What should you do before applying to strike off?

If you’ve decided strike-off is your best approach, you’ll need to first close things down properly and tell the right people.

1. Close business accounts and transfer assets

Make sure all company assets – like cash, stock, domain names, and IP – are sold, distributed to shareholders, or transferred to a personal account before you apply. If there’s money left in the bank account when the company’s dissolved, you’ll lose access to that – so make sure you empty the bank accounts. Anything left in the company (and the bank account) at the time of strike-off will go to the Crown (yes, really).

2. Settle your taxes and accounts

Make sure you:

• Prepare and submit final statutory accounts and a final Company Tax Return to HMRC.
• Pay all Corporation Tax and any other outstanding tax.
• Close your VAT registration (if applicable) using form VAT7.
• If you have employees, notify HMRC and close down your PAYE scheme.

3. Notify all interested parties

You must tell all parties affected by the closure within 7 days of applying for strike-off:

• Shareholders (members)
• Creditors
• Employees
• Pension fund managers/trustees
• Any directors who didn’t sign the application

If you don’t notify these people, it can result in a fine or even prosecution.

How do you apply for strike-off?

Here’s the step-by-step process to remove your company from the register:

1. Fill out Companies House form DS01 (it must be signed by a majority of directors)
2. Pay the £33 fee (from a personal account – not the company’s).
3. Send the form to Companies House.
4. Send a copy of the form to all the affected parties within 7 days.

Once received, Companies House will:

• Send you confirmation of receipt.
• Publish a notice in The Gazette (official public record).
• If there are no objections, publish a second notice after 2 months – confirming the company has been struck off.

From that point, your company legally stops existing.

So, you can see how (if your company qualifies) strike-off is the simplest and most affordable way to close things down.

Closing your company? Don’t risk getting it wrong

Whether you’re striking off or liquidating, getting the process wrong can cause problems with investors, HMRC, or Companies House. If you’ve reached the end of the road with your current business, take the time to close things properly and protect your future opportunities.

And if you’re thinking about what comes next, you’re in good company. Our newsletter is packed with insights, resources and real talk from other founders navigating the highs and lows of startup life.