Often when people register a business, it’s so that they can start trading under that name and using the business straight away. However, there are some circumstances when you might not want to set up your company immediately but you still want to secure that perfect name - so yes, you can register a business name and not use it. Here’s how and why you may want to do that.
What is it Called When You Register a Business Name but Don’t Use It?
If you buy a business name but you don’t create or start running the business right away, your company is dormant. A dormant company is one that has had no significant accounting transactions since its incorporation, or since the last set of accounts were filed.
What is a Dormant Company?
Companies House considers a company to be dormant if it has had no "significant accounting transactions" during the accounting period. According to HMRC, examples of these types of company include a new company that hasn't begun trading yet; an off-the-shelf company ready to be sold; an existing company that used to trade but is no longer trading; and a company that will never trade because it was formed only to hold an asset such as a property. So if you buy a company from Paramount Formations but don’t use it to trade or have any accounting transactions since purchase (or since the last filing), this is a dormant company.
Why Might You Want Your Company To Be Dormant?
You may want to own a dormant company in order to protect your business if you are operating as a sole trader. It is generally easier to register as a sole trader and run your business that way, rather than by registering as a limited company, and that's what many people start by doing. However, unless you have trademarked your business name, there is nothing stopping anyone else from using your business name if you are operating in this way. Therefore, buying a dormant company helps you to protect your brand - especially if other businesses with the same name have a bad reputation and could be mistaken for yours. By purchasing a company and keeping it dormant, you're preventing anyone else from buying the name. You can then make the company active later on, or keep it dormant for longer.
Another scenario in which a dormant company may be useful is if you already run the company but you want to stop trading for a while. In this case, you already own the company but it will become dormant when you stop using it for trading - but it will still exist. If you know you are going to come back to the company and begin trading again, this may be a good option as it will keep your name protected until that time. If you keep your company running instead, you will need to file full accounts with Companies House every year - so going dormant can save you time and money in this way.
Do You Need to File Accounts For Dormant Companies?
Even if your company is dormant, you still need to file accounts with Companies House. While companies that have traded need to file a full set of accounts, a dormant company can file dormant accounts because they are exempt from audit. At Paramount Formations, we can file dormant accounts for you. If you formed your company through us, we'll only need the name of it, and if you formed it elsewhere, we'll need just a few more details. Find out more on our Dormant Accounts page.
How to Set up a Dormant Company
Our Company Formations E-Package is ideal for setting up a dormant company if you want to protect your business name or are not yet looking to trade. It includes your new company name, all Companies House fees and free business banking for twelve months.