Q:

My 2 corporations which are subchapter S, have been idle, have no assets and have no current bank accounts. We are in NY state. They were formed about 3 years ago, and have been defunct for about 2. I have been getting conflicting advise as to what I need to do. There is no longer any business conducted and the corps. will never be active again. What should I do? Can I just let it go without any further action or filings? I have been keeping up with the tax returns, etc. only because I didn't know what to do. I just want to let them go without any liability--ie:state franchise tax. These are NY state S corporations. Thank you,

A:

Many people make the big mistake of thinking they can just walk away and abandon their corporations without undertaking the appropriate formal paperwork.  This can end up becoming a very expensive lesson because you are legally required to continue filing income tax and annual franchise tax reports for every year in which the corp is in existence, whether or not any actual activity was undertaken.

For states with minimum taxes, such as California's $800 per year, this can end up costing a ton of money, especially if the returns aren't filed in a timely manner and all kinds of late penalties and interest charges are added on.

The same office that charters corporations, usually under the state's Secretary of State, also has forms and procedures in place for formally dissolving corporations. 

It would be prudent for you to either get with a New York business attorney to prepare the appropriate forms or obtain them yourself from the web.

Once the dissolution papers have been filed and accepted, you will then need to file Federal and New York S corp tax returns that are marked as FINAL so they will know not to look for any more from your corporations.

I hope this helps.  Good luck.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 5/18/2005 01:11:00 PM Send this post: