Opening and closing businesses

[wjwren]

I have an old friend who is a bit dodgy, he constantly sets up businesses then a year or two later closes them down. The accounts show fair amount of money going through them. How do people commit fraudulent activity in this way/ can you?

[Eric Mc]

There are government hotlines you both could use if you are so concerned.

[CzechItOut]

The main way is to run up credit in the company's name and then shut the business down leaving the creditor hanging. This can be another business or more often HMRC in unpaid VAT, Corporation Tax and so on.

The reason this is possible is because of limited liability, The debts are owed by the company and not the owner.

The government are getting wise to this and are changing the law to start holding owners personally liable for debt owed to HMRC. This was announced at the last Budget, but I haven't seen any details.

[Wacky Racer]

wjwren said:

I have an old friend who is a bit dodgy, he constantly sets up businesses then a year or two later closes them down. The accounts show fair amount of money going through them. How do people commit fraudulent activity in this way/ can you?

He COULD be doing nothing wrong, better not to jump to conclusions unless you have solid proof.

[anonymous-user]

My experience is that as a company wanting credit you are usually subject to due diligence to check directors HAVEN'T been running up bills in other companies then closing the business. The same with starting a new company via Companys House. But maybe there are ways around it.