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Old 12-01-2016, 10:51 AM
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Closing down C-Corp, have questions

Hello,

I'm in the process of shutting down a C-Corporation that has had no income in 2015 and 2016. I have started the dissolution process in my home state. There are no employees or shareholders besides my spouse and myself. I do not have a tax advisor and want to make sure I'm doing this all correctly, and would appreciate some advice.

(1) The state is requiring me to submit a 2016 federal and state tax return, but the 2016 forms aren't yet available. Can I adapt the 2015 form 1120 for the 2016 tax year?

(2) is it sufficient for me to transfer the $ in the C-Corp checking account to my LLC? How do I report this correctly?

(3) The only other "asset" in the C-Corporation is a computer, with 4 years left on the depreciation schedule. How do I "sell" or transfer that asset and correctly record this?

Thank you for any help. Sorry for the newbie questions.



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Old 12-01-2016, 12:46 PM
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I'm in the process of shutting down a C-Corporation that has had no income in 2015 and 2016. I have started the dissolution process in my home state.====>You neeed to start the dissolution process with the IRS/your state Dept of Revenue a nd other jurisdictions, i.e. local govt or dept of employment or etc.

There are no employees or shareholders besides my spouse and myself. I do not have a tax advisor and want to make sure I'm doing this all correctly, and would appreciate some advice.====>It is not tough however you need to be very csareful in doing the whole processes; even some CPA s doing taxes and Enrolled Agents did not do it completely.

(1) The state is requiring me to submit a 2016 federal and state tax return, but the 2016 forms aren't yet available. Can I adapt the 2015 form 1120 for the 2016 tax year?=>Correct in your case, most I guess how many states, you need to use 2015 form as you said form 2016 is NOT available yet. For sure, please contact your home state Dept of revenue. Also you must file and submit form 966 to the IRS.you must file a final tax return with the US IRS and indicate on that return that it is the last return for the Company.you also need to file final return with your home state dept of revenue but you do not need to submit FORM 966 to your state however you must file change of business status form issued by your home sate with your home state dept of revenue. You also MUST submit other similar forms to other jurisdictions, i.e, local govt or dept of employment or payroll tax or excise tax related jurisdictions in your home state. As said you need to contact your state government for more info in detail.

You can convert C corp to an LLC without dissolving the C corp. Converting from a C corp to an LLC without dissolving the corp requires filing a document, called a Certificate of Conversion, with the state agency responsible for registering business organizations.

(2) is it sufficient for me to transfer the $ in the C-Corp checking account to my LLC? How do I report this correctly?===>. If the corp was properly dissolved, you need to close all of the business accounts and will now need to open new accounts for the new LLC and transfer money in the old C corp acct to the new acct with the MMLLC. As a new business, you may not use any of the old corp's accounts. You will set up new bank accounts for the new business, and apply for a new EIN with the IRS. You are required to obtain a new EIN as you convert your C corp to MMLLC, partnership or SMLLC soleownership.Additionally, if required in the state where the new business is registered, you must apply for a new state tax ID.

(3) The only other "asset" in the C-Corporation is a computer, with 4 years left on the depreciation schedule. How do I "sell" or transfer that asset and correctly record this?
======>I do not think this is your case however, If the c corp sells the computer at a later date, the gain(if there is ) on the sale will be taxed After the sale of assets by the C corp, the company pays corporate taxes at the ordinary rate. In order for the shareholders to receive the after-tax proceeds from the sale of assets, the C corp must then pay a dividend to them. This dividend is taxable to the shareholder at the capital gains tax rate. The payment of taxes by the company on the sale of assets and subsequent payment of taxes on the dividend to the shareholders is known as double taxation. I mean The asset that is sold is compared to its depreciated basis and the difference is treated as ordinary income to the C Corp. as said, this new found income drives up your corporate tax rate, often to the maximum rate of around 34%. You are not done yet. As saidThe corp pays this tax bill and then there is a distribution of the remaining funds to the shareholders. They are taxed a second time at their long term capital gains rate.In general, you need to keep all assets that may appreciate in value outside the C Corp . So after paying the corp taxes on the gain, you make a capital contribution to the LLC when you transfer money, property or services. The capital contribution then becomes the property of the LLC. A member who adds capital to an LLC buys an ownership stake, which normally entitles you to a proportionate share of LLC profits and voting rights. You as a member make capital contributions when the LLC is first formed and at any time during the LLC?s lifetime, as long as all members agree. Individual capital accounts are created to receive contributions to the LLC from each member. The capital account reflects how much money the member would receive if the LLC dissolved, liquidated its assets, paid its debts and distributed remaining proceeds to each member in proportion to his ownership percentages. The balance in each member?s capital account initially equals the value of his first capital contribution. This balance can be adjusted up or down even with no further capital contributions if the LLC takes on debt, its property appreciates or depreciates, or its cash earns interest. OR Basically you will contribute the asset at the same value into your LLC. In general, no gain or loss is recognized upon the contribution of money or property to a limited liability company (?LLC?) in exchange for an LLC interest. Neither the contributing member nor the LLC is taxed. When recording this transfer into the LLC, you will retain the same actual cost and accumulated depreciation. You will continue to use the same depreciation schedule as you maintained with the C-corp. If a member contributes depreciable property, I mean your computer in this case, to the LLC, the contributing party is protected from the recognition of gain on the contribution. However, the contributed property remains subject to recapture upon a later disposition by the LLC.



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Old 12-01-2016, 06:44 PM
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Oh my, I did not expect such a thorough reply, thank you so much for your time and expert advice, Wnhough.

I have been in touch with my state's dept of revenue and business, etc. and am aware that I need to handle all this on state and IRS level.

I was not clear enough in my original post - I do already have an LLC with separate EIN and bank account, which pre-exists the C-Corp. In other words, I'm not looking to open a new one. The LLC is already enough for me to manage, hence my decision now to close the C-Corp that I now see I should never have opened.

I will need to read, and re-read, your detailed explanation of the implications of disposing of property from the C-Corp, since this is all quite new to me and obviously more complex than I even imagined.

Time for me to put on my thinking cap and try to get my head around all of this! I am not even sure where to put any "sale" of the computer on Form 1120 - will have to read the form instructions - that gives you some idea of how out of my depths I am with this challenge.

Thank you again for your assistance.



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Old 12-01-2016, 07:19 PM
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I do already have an LLC with separate EIN and bank account, which pre-exists the C-Corp. =========>>As said, just for reference, as you convert the C corp to a MMLLC or a partnership, You will be required to obtain a new EIN aslongas you change your C corp to a partnership( I mean MMLLC) or a sole proprietorship( a SMLLC).I guess you know of this.



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Old 12-09-2016, 08:00 PM
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I want to completely dissolve the C Corp, with no future conversion to - or relationship with -any LLC, therefore I'm not looking to get a new EIN. Sorry if I did not explain my situation correctly.

My challenge is to comprehend (as well as properly execute and report) the distribution of cash assets to the shareholders (myself and my spouse), and also to "sell" the one other asset (computer). Again, no income this year. In zero'ing out the C Corp assets (it has only $7K in a checking account, by the way) through a distribution, and in filling out Form 1120, not sure if I also have to complete 1099-DIV or other form?

I thought this would be simple, but I'm scared to make a mistake. I have been searching for step-by-step instructions but cannot find anything that quite fits the bill and matches my situation.

Thank you again for any assistance. (or do I need to hire an accountant for this?)



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Old 12-09-2016, 09:59 PM
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[quote=pearl7;32743] [quote]want to completely dissolve the C Corp, with no future conversion to - or relationship with -any LLC, therefore I'm not looking to get a new EIN. Sorry if I did not explain my situation correctly.===========>OK I mean You will be required to obtain a new EIN if
You change your C corp(after its dissolution) to a partnership or a sole proprietorship.
Once your C corp has been assigned an EIN, it is permanent. That EIN will never be reassigned to another biz. The IRS may close your account and your tax filing obligations may cease, but the EIN will still be used to identify your C corp, even after it has dissolved. This allows the IRS to easily locate your tax records if questions arise concerning prior tax years.
My challenge is to comprehend (as well as properly execute and report) the distribution of cash assets to the shareholders (myself and my spouse), and also to "sell" the one other asset (computer). Again, no income this year. In zero'ing out the C Corp assets (it has only $7K in a checking account, by the way) through a distribution, and in filling out Form 1120, not sure if I also have to complete 1099-DIV or other form?= Dissolution can be more complicated than corporate formationYou, as an Owner, wishing to close down your C-corp, must follow specific steps for dissolution to ensure all governmental and private requirements are satisfied.ass aid previously, you need to file the final income tax forms for the C corp,i.e., F1120 for IRS and your state form for your sate govt or other forms for your local/city govts. etc. for the final year of operation. You need to check the box on the tax forms to indicate that this is the corporation?s final income tax return. Also in your particular case, you must file Form 4797 to report selling a portion of assets used in the C corp. A common reason for receiving/issuing a 1099-DIV form is because some of the stocks you own pay dividends, or a mutual fund you invest in made a capital gains distribution to you during the year.you have monies left in the corp account that you will distribute to yourself (only shareholder). Then, yopu , I mean C corp, have to generate a 1099-DIV with the IRS by mar 31 2017 for efile and you can do this via with your software or etcYou want to make sure you check the box for "cash liquidation dividend" so you will have it treated as a capital gain.


Remember:The consequences of not dissolving your corp can be severe and are not worth taking the necessary steps to make it official. Aside from a lack of corporate closure, some of the consequences you may be forced to deal with include the following:
Tax Filings. Until the corp is formally dissolved, it will continue to be required to file all relevant federal, state, and municipal tax reports. Failure to do so will result in the normal penalties and fees associated with a late filing.ALSO, Since the business is still considered a legally viable entity, its officers, directors, and shareholders may be personally liable for the corporation, even if it is no longer doing business.Your corp will need to file annual reports every year (and pay the penalties for neglecting to file them) until the corporation is dissolved. A corp that has not been officially dissolved continues to risk future product liability from the products it sold while it was in operation.Shareholders are not legally entitled to their share of the corporation's assets until it has been officially dissolved with the secretary of state.


I thought this would be simple, but I'm scared to make a mistake. I have been searching for step-by-step instructions but cannot find anything that quite fits the bill and matches my situation. Thank you again for any assistance. (or do I need to hire an accountant for this?)
===>it is up to you; UNLESS you can do it, you need to get semiprofessional you help from an Enrolled Agent or a CPA doing taxes in your local area for sure;



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Old 01-28-2017, 01:32 AM
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I have a very similar question. My company was organized as a C Corporation in January 2009, registered in NV. The business was registered as a foreign corporation in AZ.

The business operated successfully for a year until it closed down in at the end of 2009. Both NV and AZ suspended the corporate registration in 2010 due to failure to file annual reports.

In 2010, Federal and AZ State corporate income tax returns were filed for tax year 2009.

From 2010 onward, the company did not operate. Late in 2011, my tax accountant filed one last IRS federal and AZ state return with zero earnings and expenses. Basically, a "zero return." The accountant did not file Form 966 and I did not know this was necessary.

No corporate tax returns have been filed since. No returns have been filed for 2011, 2012, 2013, 2014, 2015 or 2016.

1. Do I need to file a dissolution with both NV and AZ for a suspended corporation before proceeding to file a Form 966?

2. Do I need to file any additional "zero returns" for 2011-2016 while filing the Form 966?

Thank you in advance for any assistance with this.



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Old 01-28-2017, 12:01 PM
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Quote:
Originally Posted by gMarconi View Post
1. Do I need to file a dissolution with both NV and AZ for a suspended corporation before proceeding to file a Form 966?

2. Do I need to file any additional "zero returns" for 2011-2016 while filing the Form 966?

Thank you in advance for any assistance with this.
#1; The Corporation must file the IRS Form 966 with the IRS not with NV/AZ within 30 days after the adoption of a resolution or plan to dissolve; you need to file Form 966 with the IRS Center at the address where the corp files its income tax return.



#2;yes; An individual who doesn't earn a cent of income might not have to file a tax return, but the rules are different for corporations. Under the tax code, every U.S. corporation that's in business to make a profit must file a tax return regardless of whether it made any money. The instructions for IRS Form 1120 are quite clear: All corps based in the US "must file an income tax return whether or not they have taxable income." The same rule applies to partnerships and limited liability companies that have elected to be taxed like corps. The only exceptions are for corps exempt from tax under Section 501 of the Internal Revenue Code. Those include charities, foundations and other nonprofit institutions and even they must file returns if they have certain kinds of income.also you need to check the box on the tax form of 1120 to indicate that this is the corp?s final income tax return. You may also need to file Form 4797 to report selling a portion of assets used in the corp. Or you need to file Form 8594 to report selling the entirety of the corporation?s assets as a group sale



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Old 01-30-2017, 11:48 PM
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Okay, I've filed the following within 30 days of the resolution: Form 996, 1120, 4562, 4797, 8594, 1065, and Schedules K-1 (for myself and my spouse). Hopefully am on the right track here.
Now I'm confused about whether filing the K-1 (for the distribution of remaining funds in the C-Corp to us as the owners of the C-Corp) as well as the 1099-DIV (with box 8 completed for "cash liquidation dividends") for each of us + Form 1096 is redundant or in fact necessary?
I think tomorrow (1/31) is the deadline for the 1096 and the 1099, so hoping to gain clarity on this one.
My question is :
do I need to complete BOTH the K-1s AND Forms 1096/1099s, for the dissolution of remaining funds (same amount on both forms)? Or am I making trouble for myself by double-reporting??
Can't figure this out, and appreciate any guidance at this 11th hour. Many thanks.



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Old 01-31-2017, 04:28 AM
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Originally Posted by pearl7 View Post
Sorry if this post is appearing twice, I am not sure if my post disappeared or is pending in moderation, so here it is again:

Okay, I've filed the following within 30 days of the resolution: Form 996, 1120, 4562, 4797, 8594, 1065, and Schedules K-1 (for myself and my spouse). Hopefully am on the right track here.
Now I'm confused about whether filing the K-1 (for the distribution of remaining funds in the C-Corp to us as the owners of the C-Corp) as well as the 1099-DIV (with box 8 completed for "cash liquidation dividends") for each of us + Form 1096 is redundant or in fact necessary?
I think tomorrow (1/31) is the deadline for the 1096 and the 1099, so hoping to gain clarity on this one.
My question is :
do I need to complete BOTH the K-1s AND Forms 1096/1099s, for the dissolution of remaining funds (same amount on both forms)? Or am I making trouble for myself by double-reporting??
Can't figure this out, and appreciate any guidance at this 11th hour.

Many thanks.
Okay, I've filed the following within 30 days of the resolution: Form 996, 1120, 4562, 4797, 8594, 1065, and Schedules K-1 (for myself and my spouse). Hopefully am on the right track here. ==>You mean form 966 noT 996. Why 1065???



Now I'm confused about whether filing the K-1 (for the distribution of remaining funds in the C-Corp to us as the owners of the C-Corp) as well as the 1099-DIV (with box 8 completed for "cash liquidation dividends") for each of us + Form 1096 is redundant or in fact necessary?========>No SCh K1; Purpose of Schedule K-1 of Form 1120S is ;
the shareholders are liable for tax on their share of the S-corp income, whether or not distributed, and must include this share on their personal tax returns. A Sch K-1 must be provided to each person who was a shareholder at any time during the tax year; on or before the date the S-corp's tax return is required to be filed. C corps are taxed as living entities, paying federal, state and/or local taxes on their taxable net profit. They may choose to compensate shareholders in the form of declaring and paying dividends from their after-tax net earnings. If the C corp chooses to pay dividends, it issues 1099-DIV forms to the IRS and its shareholders. While corps most often issue 1099-DIVs to report stock dividend distributions, it can also be used to report nondividend distributions, including money a corp returns to an investor during the liquidation process. Corps in the process of a complete liquidation , I mean either to terminate the business or change its structure to a non-corporate status , are required by law to transfer all cash and property assets back to shareholders as payment in full for the exchange of stock. IRS tax code says that if a shareholder is eligible to receive a cash liquidation distribution totaling $600 or more, the distribution must be reported on Form 1099-DIV. unless a shareholder recovers her total investment, the amount reported on a 1099-DIV is not considered taxable income. This means that if the difference between the FMV of the stock and its adjusted base ? the price of the stock minus broker or commission fees ? is zero, no tax is due on the amount. Generally speaking, a 1099-DIV is not issued by an S Corp. Distributions are reported on Sch's K & K-1 on Line 16. Distributions include any and all assets distributed to the shareholders. Distributions are atFMV. If you have assets that have appreciated in value, the gain is reported on the 1120S and the FMV of the asset is included in the distributions If you issue a form 1099 to shareholders (even to yourself), copies of the form must be sent to the IRS. Form 1096 is the summary page the IRS requires you to send along with copies of the 1099 forms.




I think tomorrow (1/31) is the deadline for the 1096 and the 1099, so hoping to gain clarity on this one.=======>it depends; The due date depends on which information returns you are submitting. File Form 1096:
With Forms 1099, no later than the end of February each year along with the applicable returns which the form summarizes.
If you are filing electronically, you have an additional month by March 31, to file Form 1096 and can seek an extension of time

My question is :
do I need to complete BOTH the K-1s AND Forms 1096/1099s, for the dissolution of remaining funds (same amount on both forms)? Or am I making trouble for myself by double-reporting??
Can't figure this out, and appreciate any guidance at this 11th hour.=======>as adi no SCh k1s for C corp



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