When It’s Time For Your Company to Kick the Bucket

During the year, we form hundreds of corporations and LLCs, but as we approach the last quarter, our focus is killing off the entities that need to be killed off by year end.

When the officers and directors decide to end a corporation’s existence, the corporation must be “dissolved”. That process includes taking corporate action through a resolution and following the procedure required by the appropriate state. In California, if all of the shareholders vote for a dissolution, a Certificate of Dissolution is filed with the Secretary of State.There’s good reason to act quickly in the last quarter. To avoid a franchise tax obligation for 2009, we encourage our clients to review their entities and start the dissolution process as soon as possible. Completing the process by the end of the year in California will save $800 and the cost of preparing a tax return next year. The savings vary from state to state, but the same idea will apply wherever the corporation has been formed.

Some clients prefer to allow a corporation to die a slow, agonizing death. This is frequently referred to allowing a corporation to “die on the vine”. To learn more about why it’s not a great idea to allow a corporation to die on the vine, read my article entitled A Musical Guide to the End of Corporate Existence.