Dissolution of S-Corp

[peggysioux]

Have a potential new client who has not filed a tax return for three years. He was a sole proprietor when he last filed. He filed papers with the state of California to incorporate in 2004, but did nothing with the corporation - did not open a corporate checking account. Basically he filed the papers and then continued his business using his sole-proprietor checking account running nothing through the corporation. He now wants to dissolve corporation. Being nothing has been done; should he file the "certificate of dissolution" form after he files corporate tax returns for the past years showing no income or expenses? Is there anything else that would need to be done?

Thanks for your help!

[Roland Slugg]

Yes, file the dissolution

Dear peggysioux

Yes, if your prospective client now believes he won't be using that shell corp in the near future, he should take steps to file the dissolution form with the California Secretary of State.

The California Franchise Tax Board (FTB) can go after the $800 annual minimum tax imposed on corporations, so your client may already owe $2,400. It has been the FTB's long-standing policy, however, to not attempt collection of such amounts in situations such as the one you described. However, that policy is probably based on the practical difficulty of collecting from a corporation that has no assets and never did have any.

For those interested, the above does not apply to California corporations that dissolve and transfer assets to their shareholders in liquidation. The FTB can and will go after the shareholder(s) for all those accumulated $800 minimum tax amounts.

[peggysioux]

Roland, Is taxpayer

required to file the 1120S for the past years or just file the dissolution form and wait to see if the FTB notifies him regarding the $800 per year.

[Bird Legs]

Not Roland, however,

just file the dissolution papers. At least this is what I would do. If the papers
are not accepted because of the nonfiling then you could take care of that.
Just write no activity on the returns.

[Unregistered]

Dear peggysioux



The California Franchise Tax Board (FTB) can go after the $800 annual minimum tax imposed on corporations, so your client may already owe $2,400. I

Plus interest & penalties.

[Unregistered]

No federal return required!!!!!

The corporation has nothing, to file, until it first has assets, formal transfer, or you start doing business as a corpration. You do not have a stockholder until some action is taken.
Usually transfering something to the Corp for stock. It will take more than just incorporation.

Who knows about California. I did have one that had an employee there and had to pay the fee... In 1998 there was an article saying for the first time in its corporate life, U-Haul had more storage units leaving California than coming in.