How Much Does it Cost to Dissolve A Corporation
How much does it cost to dissolve a corporation will depend on several factors including the time it takes to manage outstanding debts and obligations.2 min read
How much does it cost to dissolve a corporation will depend on several factors including the time it takes to manage outstanding debts and obligations, the cost of legal fees, and other factors that are listed within the articles of incorporation.
When closing an S corporation, the articles act as a guideline. This can include holding a board meeting to present the dissolution plan, voting on the plan, and recording the meeting minutes. In comparison, a sole proprietorship or small LLC would only need to notify the secretary of state. This, however, is just the beginning. The process of dissolution has many steps that must be complied with to avoid any liability for taxes and other obligations.
Steps to Dissolve
There are several steps to dissolve a corporation. The first is related to tax considerations, which includes providing the Internal Revenue Service (IRS) with the following:
- A final tax return.
- A final employment tax return.
- A final federal tax deposit.
When the tax return is filed, you can mark a box on the first page to indicate this is the last and final tax return. In some situations, you will also need to file taxes at the state level. For employees, a final paycheck must be given, and all payroll taxes should be paid. If the corporation has more than 100 employees, the employees must receive written notice of the business closing sixty days prior.
Next, make attempts to pay any outstanding debts and obligations. Notification should be sent to all creditors notifying them of the plan to close the business with an address and deadline for any claims they want to submit. If the debts cannot be paid, bankruptcy may be a consideration. A legal and tax professional will be able to advise if this option is recommended. If all debts are paid, any remaining assets will be distributed to the shareholders.
Then, all business licenses and registrations must be canceled with the local or state government. Any business bank accounts and business credit cards must be closed as well. Failure to close the bank accounts leaves you vulnerable to future debts and obligations associated with business bank accounts.
Lastly, the Employee Identification Number (EIN), must be reported to the IRS with the appropriate form to indicate the business is closing.
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