Form 966

[Snaggletooth]

The Form 966 is the "sarcophagus" that lays to rest a corporation.

Two sidenotes/questions:

1) Should a Form 966 be used when there is no corporation, but an LLC filing as a corporation?
2) Instructions say a Form 966 should not be filed if there is no formal dissolution agreement.
Many corporations just get abandoned by their shareholders and operations just cease.

Maybe you would advise not to file in the above cases, but bear in mind if you DON'T - IRS and
State taxing authorities will send letters, notices, penalties, confiscations, etc...

[DaveinTexas]

Most clients that want to dissolve their corporations

Do not have a formal dissolution agreement (resolution). I was told recently that assisting a client in dissolving their corporation (not just filing the final returns, but actually dissolving it with the SOS) is a huge liability risk to our firm. Now, I just file the final returns and make the client do the leg work on the State documents (I actually tell them to drive to the Comptroller's office to file their final Franchise Reports and obtain a letter of clearance). This letter states the Corporation is current with all filings and owes no tax (clear of outstanding liabilities) and is permitted to end its existence with the State. They are then instructed to submit this letter to the SOS to officially dissolve the Corp. LLCs are no different.

I usually tell the client to get a lawyer involved to end a Corpoation's existence and that same lawyer told me it typically cost a few thousand dollars to do so (legal fees). Of course, as expected, the client didn't want to get a lawyer involved to create the entity and they surely don't want to get a lawyer involved to close it down.

So I suppose without a formal resolution we are not required to file the 966. Also, such a resolution (in my state) is not required to be filed with the clearance letter. But, if the client really wants to properly shut it down and absolve the corp of potential future liability (creditor claims, etc) the proper way to do it is to get a lawyer involved, the cost just might be worth it.

[Snaggletooth]

Thanks Dave

sorta what I thought. One of those situations where the cure is worse than the disease...