Closing an S corporation can be a tricky process, as it requires more than just filing a few forms. In this article, we will answer the question “How to Close an S Corp” by providing detailed instructions for the steps you need to take.

How to Close an S Corp?

To close an S Corp, you must:

  • File Form 1120-S, U.S. Income Tax Return for an S Corporation for the year you close the business.
  • File Form 966, Corporate Dissolution or Liquidation, if you adopt a resolution or plan to dissolve the corporation or liquidate any of its stock.
  • Submit a certificate of termination to the appropriate state agency.
  • Settle outstanding tax and state income obligations, along with any other financial obligations.
  • File Articles of Dissolution with the secretary of state in the state where you formed the entity you used for the S Corporation.
  • Mark the “Final Return” box at the top of each return.
  • Dispose of assets as required by law.

The most important step in the process is filing Articles of Dissolution with the secretary of state. This is the official paperwork that legally dissolves your S corporation. Depending on the state, this document may be known by a different name, such as Certificate of Termination.

After filing the Articles of Dissolution, you must mark the “Final Return” box at the top of each return. This informs the IRS that you are closing the S corporation.

Finally, you must dispose of assets as required by law. This may include liquidating any remaining stock and transferring assets to the shareholders or other parties.

Closing an S corporation is a complex process, and it is important to make sure you follow the correct steps in order to avoid any legal issues down the road. If you need more information or assistance with closing your S corporation, the experts at Atlantabusinesses.com are here to help. They are a great resource for answers to all your questions about selling a business and about business brokers.

How simple is it to shut down an S Corp?

In order to dissolve the S-Corp, a majority vote of the shareholders is usually necessary. Depending on the state, this could be a simple majority, or it could require a supermajority or a two-thirds majority.

What is the process for ending a S Corp?

If you adopt a resolution or plan to dissolve the corporation or liquidate any of its stock, you must file Form 966, Corporate Dissolution or Liquidation, as well as your corporation’s final income tax return, by Feb 2, 2023.

What are the financial implications of ending an S corporation’s status?

When an S Corporation is dissolving, its shareholders will have to receive individualized versions of Schedule K-1 (Form 1065). Even though S Corporations are pass-through entities and there are no federal taxes due from the company, shareholders may need to pay taxes on their own profits.

Should I terminate my EIN if I shut down my business?

Once you have finished paying taxes, submit a request to the IRS to deactivate the EIN for your business. Even if the account is closed, the EIN number will remain with your company and cannot be transferred to a different business.