A dormant company is one that’s not in active operation and has no significant assets or liabilities. Dormant companies are often used for estate planning purposes, as they can be easily transferred to new owners without the need to go through a complicated process.
Dormant companies can also be used for asset protection, as creditors cannot seize the company’s assets if it is not in operation. Here are five of the critical benefits of having a dormant company.
Can Be Used For Future Investment
A dormant company is one that’s not currently engaged in any active business. This can be for several reasons, such as the company being sold, restructured, or wound up. A dormant company can also not be currently trading due to financial difficulties or waiting on regulatory approval to commence trading again.
The main benefit of using a dormant company as an investment vehicle is that it offers a relatively low-risk and tax-efficient way to hold assets. Using a dormant company accounts form, the company can have investments such as property, shares, or other assets and provide a more cost-effective way to own them than if they were held personally.
Another advantage of using a dormant company as an investment vehicle is that it can defer capital gains tax. If the company sells an asset at a profit, the profits can be delayed until the company is wound up and the assets are distributed to the shareholders.
This can be a profitable strategy if the shareholder can’t pay the tax on the profits.
Protects Personal Assets
When a company is inactive but still registered with the state, it provides some legal protection for the personal assets of its owners. The company is still technically a separate legal entity from its owners.
In most cases, the company’s assets are not available to creditors to satisfy any owners’ debts. This provides some peace of mind for business owners concerned about their financial situation.
There are a few things to keep in mind when a company is inactive. First, creditors may still be able to go after the company’s assets if they can demonstrate that it was used as an asset shield for fraudulent purposes.
Additionally, inactive but not dissolved companies may still be subject to taxes and other legal obligations. Overall, though, a dormant company can protect personal assets.
Useful For Estate Planning
There are several benefits to using a dormant company for estate planning. First, the company can transfer assets to the heirs without paying any estate taxes.
Second, the company can hold assets, such as real estate, which can then be transferred to the heirs without having to pay any capital gains taxes. Third, the company can continue doing business after the owner dies.
This is helpful in situations where the heirs want to keep the business running. Finally, the company can be used to reduce or eliminate estate taxes.
Remember that when using a dormant company for estate planning. First, you should make sure that the company is inactive and is not doing any business. Second, ensure that the company is in good standing with the state.
Third, you should ensure that the company has no assets or liabilities. Finally, ensure that the company files a financial statement with the state each year. If you follow these guidelines, you can use a dormant company to reduce or eliminate estate taxes.
Protects The Company’s Name
A dormant company can protect its name by filing for a trademark. This will prevent other businesses from using the same or a similar name. The brand will be registered with the trademarks office and valid for ten years. The company can renew the trademark registration every ten years.
There are multiple benefits to registering a trademark. Some of the key benefits include;
- The rights to exclusive use of the mark in connection with the goods or services.
- A ‘constructive notice’ to others that the mark is registered and thus has a higher level of protection.
- It brings an infringement lawsuit in federal court.
- The ability to obtain treble damages (meaning three times the amount of actual damages) and attorneys’ fees if successful in an infringement lawsuit.
- Registration also provides a basis for obtaining foreign registrations.
Saves on Incorporation Costs
When a company is no longer doing business, it can still save on incorporation costs by dissolving the company. This is done by filing dissolution articles with the state and following the appropriate steps to wind up the company’s affairs.
The company will need to notify its creditors and customers of the dissolution and make arrangements to pay any outstanding debts. By dissolving the company in an orderly manner, it can avoid many costs and hassles associated with formal bankruptcy proceedings.
Conclusion
It’s prudent to be prepared when handling a company that’s been declared dormant. It can still be as helpful and productive before it becomes inactive.
All the benefits listed above testify that all is not lost when your company seems to be losing a sense of direction in the corporate world.
