Business Lawyer Orange County Franchise Taxes S Corporation

Written by: Andrew Gale - Orange County - Small Business Attorney

Business Lawyer Orange County, Q#13001, S Corp Minimum Franchise Taxes – Whose Responsibility?

I formed a California corporation in 2008. There was only one shareholder of the corporation. I was the sole officer, director, and resident agent for the service of the process of the corporation. I operated the corporation for six months.

Unfortunately, the business was not successful.

There was ultimately no income or outstanding debt. Furthermore, there is no business that could lead someone to consider bringing a lawsuit against the corporation. Because the whole operation seemed to go nowhere, I decided that I would not file any corporate documentation or any tax returns.

I eventually forgot all about the corporation.

However, recently I search the website for the California Secretary of State and there was a notation that the corporation had been “suspended”.

I want to dissolve the corporation but I cannot afford to pay the California Franchise Tax Board the minimum franchise tax fee of $800 per year times the four years that I have not yet paid.

Orange County Business Lawyers, A#13001, S Corp minimum Franchise Taxes -Whose Responsibility?

What will happen if I leave the corporation permanently suspended?

I believe that the state of California will ultimately revoke the status of the Corporation and it will cease to exist.

Will it continue to accumulate $800 per year forever?

Until the status of the corporation is permanently revoked, it will continue to accumulate the minimum franchise tax fee of $800.00 per year.

Am I personally liable for the taxes?

In general, you are not personally liable for the taxes of the corporation unless you sign documentation to the contrary. However, if the corporation had any assets that were distributed to the shareholders (you), I believe that the state of California may make a concerted effort to have you disgorge the money that was distributed out of the corporation before all of the debts and obligations to the state were paid.

Will I have any troubles opening a new corporation in California if I’m listed as an officer, director, or agent for service of process on the suspended corporation?

You should have no trouble opening up a new corporation in the state of California even though you are listed as an officer, director, and/or resident agent for service of process on the suspended corporation.

When it comes to small business corporations, an owner of a small business can face just as many complexities closing down the corporation as they face when starting up the corporation in the first place. It is always best practice for small business owners to consult with an Orange County Small Business Law Firm that handles these types of situations on a regular basis. If you should have any questions about how to properly close or dissolve your small business corporation, please contact the Business Lawyers Orange County– the Incorporation Attorney at (714) 634-4838.