Discussion:Dissolving a C-Corp
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Discussion Forum Index --> Advanced Tax Questions --> Dissolving a C-Corp
Discussion Forum Index --> Tax Questions --> Dissolving a C-Corp
| 31 July 2008 | |
| This question has some interesting twists. At least we think so. Late last year we were hired by a client who originally started a C-Corp in another state, moved to our state and was advised by his previous CPA to leave his C-Corp open and start a single member LLC (for the same business). The client used money from the corp to seed the LLC. The money was treated as a receivable on the corp books and payable on LLC. Now the client would like to dissolve and close the corp. The problem is with the loan on the books. If we write it off doesn't it become taxable income to the LLC? Is there any way to close the corp without showing income anywhere since there really is no income and there's just one member (shareholder in the C)in both companies.
We beleive that the situation would have been better if the C just elected s status when they moved and registered in the new state. (the client's net income is much more substantial than just a "reasonable salary"). Any help is greatly appreciated. | |
| July 31, 2008 | |
| Why not just move the corp? Why go to the trouble of closing it and paying tax and reforming an LLC? Do an F reorg, get registered in the new state, get your S election done! and be done with it. | |
| 31 July 2008 | |
| can't C corp liquidate and distribute note out to shareholder? | |
| 31 July 2008 | |
| Like JRs approach. If the Corp liquidates, there is cancellation of indebtedness to shareholder. After all, it was tax free cash taken out of the corporation in the form of a loan. | |
| 31 July 2008 | |
| Thank you all for your responses. The member took the money from the C to start the LLC, (which is really the C business as a new entity.) so he didn't get a tax free distribution. Unfortunately the LLC is already set up and operating. The C isn't being used except for this receivable. All of the revenue and expenses are in the LLC. I agree the S election is the best way to go, but I still have these other entities clunking around. | |
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