What's a dormant company?

PoGee

I was checking an accountant's credentials before I sign up with them. The firm is medium sized. The accountant that had been recommended to me is experience; he's got a personal company as well as his day job but it's listed on Companies House as dormant. He's recently filed confirmation paperwork to Companies House (first set up in 2020). What does that mean? It says that dormant is a non-trading company - if this is correct, why would he set it up? Is it for his personal tax purposes? The codes on his dormant company are 69201(Accountancy), 69202 (Bookkeeping) and 70229 (other financial management). I don't want to hand over any of my details if there's something dodgy going on.

comeandgo

Could be that he has not completed his first year trading so no accounts on file yet.  It could be the ltd company is dormant and he is trading as sole trader.

PoGee

It was set up in his own and his wife's name in 2020 but he (the accountant) resigned from the 'dormant company'. The wife is not an accountant. I think she's a housewife.

daveyjp

Dormant simply means the company hasn't operated or transacted over the period before the accounts were due, but the company is still registered.

Lots of reasons why, but its not an unusual situation.

PoGee

Did a bit more digging. Google says it can be to hold freehold property. So does that mean rental properties can be held in that type of company? I have a rental and thinking of getting another.

Jeremy535897

Your initial post is not clear. Do you mean that you are considering engaging a medium sized accountancy firm, and your contact there (his day job) also has a dormant company? Or do you mean that you have a medium sized business and are considering appointing an accountant sole trader who also happens to have a day job?

As the dormant company is listed as a trading company in the financial sector, I doubt its purpose is to hold rental income. More likely it has been formed to prevent anyone else setting up a company using that name. He will trade as a sole trader, but the company protects the name.

daveyjp

PoGee said:

Did a bit more digging. Google says it can be to hold freehold property. So does that mean rental properties can be held in that type of company? I have a rental and thinking of getting another.

Perfectly normal for rental properties to be held and operated through a Ltd company.

PoGee

Jeremy535897 said:

Your initial post is not clear. Do you mean that you are considering engaging a medium sized accountancy firm, and your contact there (his day job) also has a dormant company? Or do you mean that you have a medium sized business and are considering appointing an accountant sole trader who also happens to have a day job?

As the dormant company is listed as a trading company in the financial sector, I doubt its purpose is to hold rental income. More likely it has been formed to prevent anyone else setting up a company using that name. He will trade as a sole trader, but the company protects the name.

I mean - I'm considering engaging a medium sized accountancy firm, and the recommended contact there (his day job) also has a dormant company.

Jeremy535897

I think the reason for him registering the company in his name is as I said in my earlier post, but it begs the question as to why the individual concerned is not working full time at the medium sized firm, unless he is protecting the name for something in the future. So long as your contract is with the medium sized firm, you have the protection of their indemnity insurance if anything goes wrong, but you might find he leaves in a year or two and offers to do your work more cheaply as a sole trader. You wouldn't have to say yes, but you would then start over with a new contact.

All this is speculation. He is bound by his employment contract to act professionally in regard to you as a client of the medium sized firm. If it bothers you a lot, ask him why he has formed the company.

PoGee

Jeremy535897 said:

I think the reason for him registering the company in his name is as I said in my earlier post, but it begs the question as to why the individual concerned is not working full time at the medium sized firm, unless he is protecting the name for something in the future. So long as your contract is with the medium sized firm, you have the protection of their indemnity insurance if anything goes wrong, but you might find he leaves in a year or two and offers to do your work more cheaply as a sole trader. You wouldn't have to say yes, but you would then start over with a new contact.

All this is speculation. He is bound by his employment contract to act professionally in regard to you as a client of the medium sized firm. If it bothers you a lot, ask him why he has formed the company.

He is working full time at the firm, as far as I am aware.

Jeremy535897

Ask him why he's registered the company, as you are concerned that he might be leaving the medium sized firm in the near future.