Legal Question in Business Law in California

Subchapter S - How to close

What is required to officially close a Subchapter S corporation that was founded a few years ago and that has had virtually no activity for the past 2 years and no available funds remaining? The hope is to completely close the corporation by the end of calendar year 2000 to avoid financial obligations (e.g. $800 annual S corp tax) for another year. A checklist, including estimates of time, cost, and specific items to attend to, such as governmental entities to contact and forms to complete, etc. would be most helpful.


Asked on 10/30/00, 9:32 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Subchapter S - How to close

While a lawyer would always prefer to have his or her clients wind up and dissolve the corporation formally, the fact is that many corporations simply stop paying tax and filing annual statements of officers, and nothing bad happens to their former officers and directors.

This doesn't work, of course, if there are unpaid creditors, dissatisfied stockholders, unfulfilled contracts, substantial undistributed assets, or potential lawsuits (consider employee claims, product liability, etc.).

If the business is truly problem-free and no one is likely to object (especially the IRS), there is little danger in just letting it become suspended. Don't conceal this from anyone. Shake the bushes for possible claimants against the company.

If there is any possibility of a problem, use an attorney to wind up the affairs.

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Answered on 11/16/00, 10:51 pm


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