Often limited company owners - especially those that essentially sell their own services through the company - assume that, when they stop working, that will necessarily be the end of the life of their limited company too. It’s easy to see why people default to believing that their personal company is tied to their own working life in that way, but it needn’t be. It will often be appropriate to close down a company when its owners stop working, but not always.
Although owners will often use their company to channel year-on-year income to themselves, and they might consider the dividends they get this year to be “this year’s” profit, there’s no actual link between a £1 of revenue coming in and £1 of dividends going out. Money is a fungible asset (a few years ago, it was mostly just accountants who knew what that meant, but now the concept is rather more widely known!).
It can be helpful to think of the profits in a company as being like a reservoir, where profits go in, and dividends get drawn out. If a company is making significantly more profit than its owner is taking out in dividends, the reservoir will fill up. Just because the owner stops working, and therefore stops filling up that reservoir, it doesn’t have to be drained immediately. There’s no special link between the work done to create the profits and the dividends that are paid out (if you own some shares in Vodafone, you’ll get a dividend from time to time, but you’d not expect to be told it was the profit from Dave selling an iPhone last Thursday).
Sometimes it can be efficient to empty the reservoir right away! There can be tax planning opportunities from winding up a company like that. Equally, though, it might be appropriate to keep taking dividends for the time being - gradually emptying out that reservoir. It could be a way of getting money out even more tax-efficiently than a liquidation, and some people might prefer the gradual, planned drawing-down of the money to one big hit of cash.
It can be hard to separate your company from yourself (especially if you’ve been working through it for a long time and it’s called Your Name Limited!). But if you can get to the point of seeing it as a separate entity (or reservoir!) that can be very helpful.
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