How do I shut down a business that isn’t making any money?

I set up an e-commerce business as a sideline but have decided it’s not worth continuing with it.

It’s a separate business from my other business and I ran it alone. I want to voluntarily delete it now. However, I am considering keeping the website in case in the future I decide to start another business with something different but related.

I understand that I must have not traded for three months before applying to HMRC to strike.

Should I disable the website from public viewing, or can I post a notice that we are no longer taking orders and disable the commerce gateway?

Angharad Carrick from This Is Money replies: It’s harder than ever to run a small business, so it’s understandable why you’d want to close down your second business if it turns out to be more hassle than it’s worth.

Closing a business can be a stressful experience, especially if you run another business full time.

It is unclear whether you operated this second business as a sole proprietorship, but since you indicate that you want to voluntarily retire, it is likely that you operated as a limited liability company.

You have a few options when it comes to closing your business, but the first thing you need to do is make sure you’ve tied up all the loose ends.

This means settling outstanding accounts and collecting amounts due, as well as informing HMRC that your company is no longer trading so that you are not hit with corporate tax reminders.

If your company is solvent, there are two ways to dissolve your company: an informal or voluntary strike and voluntary liquidation of members.

A voluntary strike is when you choose to close your business, rather than a mandatory strike, when you are forced to stop trading.

You must file a form with Companies House, but as you say your company must have been inactive for at least three months.

This means that you have not traded or sold shares, changed names or been threatened with liquidation in the last three months. You also may not have agreements with creditors such as a company voluntary arrangement.

If no objection is raised, Companies House will confirm the closure of your business in a public notice in an official public register when the three months have passed.

The most important thing to remember is that you must transfer all company assets before closing, because once a company is delisted, all bank accounts will be frozen.

Lauren Harvey, founder and director of Full Stop Accountants and member of the Xero Partner Advisory Council replies: I like your suggestion to stop taking sales and put that note on the website – messaging is often key in these things.

In terms of Companies House and delisting, as long as you don’t owe anyone anything after that three-month non-trading period, you should be fine to continue.

However, if you owe staff, HMRC (VAT and PAYE) or suppliers, make sure you contact them to explain and make sure they are aware of the situation before then, and to confirm whether they have any objection to the turn.

In addition, you should decide how to split any remaining assets such as stocks, bank balances, etc., and remember the potential personal impact of this on your personal tax return before the final cut-off date.

In addition, although Companies House does not require final accounts, they will be required by HMRC along with the associated corporate income tax return. You must also keep all data for seven years.

These are just a few tips that will hopefully be useful as a starting point, but it’s important to make sure you seek advice from your own accountant, who can provide more tailored guidance appropriate to your situation.

Angharad Carrick adds: When closing your business, also consider the possible tax consequences.

Keep in mind that if you close your business and take assets out of the business before delisting, you may have to pay capital gains tax. If the amount is worth more than £25,000, it will be treated as income and you will have to pay income tax on it.

A voluntary strike is a fairly straightforward process and if your winnings are less than £25,000, this is probably your best option. If retained earnings exceed that threshold, a member’s voluntary liquidation may be fiscally better.

The voluntary liquidation of a member will close your company and distribute the assets to shareholders in cash. However, you need a licensed insolvency practitioner to manage this.

Instead of taking profit as a final dividend, which counts as income, the profit is paid out as a capital gain and is thus subject to CGT. The process is much longer and takes about a year from start to finish.

From what you have said you are not sure what you want to do with the company as you may want to pick up the website again for another company.

You do have the option to put your company dormant, which means that while you are not actively trading, you will still be listed on Companies House and you can retrieve it later.

You will still need to file a tax return to show HMRC that your company is dormant, but there is no limit to how long a company can remain dormant.