Dissolving Business Regularly

[rufmeister]

I have been asked to do some work for a company, and did my usual searching, which threw up a bit of history on the company owner, who has had 6 companies in 6 years, dissolving one on a pretty much annual basis.

The companies are all completely unrelated in terms of what they are, one was hi fi, one was book keeping, one was building homes...yet all last about a year and all dissolved.

All looks a bit dodgy to say the least.

[Hoofy]

rufmeister said:

I have been asked to do some work for a company, and did my usual searching, which threw up a bit of history on the company owner, who has had 6 companies in 6 years, dissolving one on a pretty much annual basis.

The companies are all completely unrelated in terms of what they are, one was hi fi, one was book keeping, one was building homes...yet all last about a year and all dissolved.

All looks a bit dodgy to say the least.

Voluntary work, right?

Let me guess the business names: Phoenix Hifis, Phoenix Bookkeeping, Phoenix Homes?

[Alpinestars]

Solvent or insolvent dissolutions?

[OldGermanHeaps]

Maybe dig into how they treated their creditors?
There are a couple of places round here that go pop every couple of years but its to stiff the taxman or get rid of problem employees, but they never stiff their suppliers because they will be reopening and want to deal with the same people.
Otoh there are a few that deliberately run up big debts before folding.

[cheekymeerkat]

I've come across this myself and often wondered the same.

Surely there comes a point when a bank or credit insurer will not lend to these new businesses due to the director holding directorship's at previous phoenix companies?? How does that all work?

[rufmeister]

The .gov site shows them all as "dissolved", no accounts submitted.

I have dug a bit deeper, and he seems to be the MD of 1 particularly high end, and successful business.

The ones I see shutting down annually are mostly him and his wife, and 1 or 2 others.

Could it be something like the successful company A gives the other company B a loan to start up, company B spends all that money on things, has no money coming in, so dissolves, and company A gets to write off the loan?

Anyway, shall be requesting payment up front for sure, if not, I won't be doing it.

[Hoofy]

rufmeister said:

The .gov site shows them all as "dissolved", no accounts submitted.

I have dug a bit deeper, and he seems to be the MD of 1 particularly high end, and successful business.

The ones I see shutting down annually are mostly him and his wife, and 1 or 2 others.

Could it be something like the successful company A gives the other company B a loan to start up, company B spends all that money on things, has no money coming in, so dissolves, and company A gets to write off the loan?

Anyway, shall be requesting payment up front for sure, if not, I won't be doing it.

Ah, surely you can only do that so many times!?

I suppose you can get stuff ordered like equipment under one company and give it to the other company. Dunno how that works from an accountancy perspective.

Why not just order equipment (cars, fridges, anything) with one company (that will be shut down) and sell it with the other company? Rinse and repeat.

[Mortgage_tom]

Its not unusual to setup a company build a house, sell the house and then dissolve the company.

Its done to claim VAT back on the build costs I think.

So that might explain the building company.

[Dan_M5]

Mortgage_tom said:

Its not unusual to setup a company build a house, sell the house and then dissolve the company.

Its done to claim VAT back on the build costs I think.

So that might explain the building company.

dont need to be a company to claim the VAT back on a new build iirc

[sideways sid]

Ask the owner.

[lyonspride]

Came across this a few years ago....

https://www.electriciansforums.co.uk/threads/direc...

The way it works is first company racks up debts buying materials/equipment/etc, goes insolvent, sell the assets to 2nd company and does the same again. The losers are the employees and anyone they owe money to.