Question: Dissolving my Corporation, What Will Be My Personal Responsibility?
If I am an S corporation and I file to dissolve my corporation, what will be my personal responsibility? I do not believe I would be able to remain in operation being there would not be any funds or credit to operate.
Answer: Here are some general thoughts
When a business entity is closing its operation, steps must be taken to remove the entity from the tax and public records.
The shareholders of the corporation and the board of directors will form a plan of dissolution which includes taking care of outstanding corporate liabilities (debts of the corporation) including any outstanding taxes.
Technically, domestic corporations will “dissolve” the existence of the corporation. This means that you must go through the process of officially closing down the business with the California Secretary of State and the California Franchise Tax Board.
Many people who have set up corporations in California without the assistance of a business attorney make the mistake of thinking that they can just walk away from the corporation if it runs out of capital to operate. This is simply not the situation, nor is it best practice for managing the annual corporate records.
In all cases, the business must be in good standing. This means that the corporation must be deemed “active” with the Secretary of State.
To check the status of a corporation, you can go to the website for the Secretary of State where the information is available online. In addition, a Tax Clearance Certificate must be issued for both domestic and foreign for-profit corporations with assets.
All documents for dissolution or withdrawal, including the request for the tax clearance, will be submitted together as part of a package to the “Division of Revenue” better known in the state of California as the California Franchise Tax Board.
Have a related question for Orange County Business Lawyer?
Feel free to use the comments area below to submit your question or complete a kick-off call on our “Orange County Business Lawyer Contact” form.
About these legal questions & Answers – disclaimer.