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Dissolution of corporation refers to the closing of a corporate entity which can be a complex process. Ending a corporation becomes more complex with more owners and more assets.
Business dissolution can be caused in many ways, including the failure to file annual reports or pay certain taxes in the state of incorporation, bankruptcy, or voluntary dissolution by business owners.
There are three causes of dissolution: (1) by act of the partnerssome dissociations do trigger dissolution; (2) by operation of law; or (3) by court order. The partnership agreement may change or eliminate the dissolution trigger as to (1); dissolution by the latter two means cannot be tinkered with.
An S-Corp is subject to the same tax rules that apply to the distribution of C-Corp assets when it closes. In other words, both the corporate entity and its shareholders must recognize gains or losses from dissolution.
Dissolution of corporation refers to the closing of a corporate entity which can be a complex process. Ending a corporation becomes more complex with more owners and more assets.
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You must file Form 966, Corporate Dissolution or Liquidation, if you adopt a resolution or plan to dissolve the corporation or liquidate any of its stock. You must also file your corporations final income tax return.
The liquidation of a company is when the companys assets are sold and the company ceases operations and is deregistered. The assets are sold to pay back various claimants, such as creditors and shareholders. The liquidation process happens when a company is insolvent; it can no longer meet its financial obligations.
Once a business entity is administratively dissolved, it is prohibited by statute from engaging in any activities other than those necessary to liquidate its assets and wind up its affairs.
Section references are to the Internal Revenue Code unless otherwise noted. A corporation (or a farmers cooperative) must file Form 966 if it adopts a resolution or plan to dissolve the corporation or liquidate any of its stock. Exempt organizations and qualified subchapter S subsidiaries should not file Form 966.
When administrative dissolution occurs, a business can still operate, have bank accounts, and accept payments. However, a creditor cannot go after any possible assets of that entity.

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