THE REASONS:
As a trader you may need to (or want to) dissolve a separate trading entity for the following
reasons:
- To save the money, normally
spent on fees, once the trading activity slows down too low to be
classified as a trader for IRS purposes.
- If you move out of the State
where the entity is registered, sometimes dissolving and perhaps
forming a new entity elsewhere is less expensive overall.
- For avoid the formality of
attempting to revoke the mark-to-market election(s) made by the
entity.
- SMLLC dissolutions are
uncharted territory in this regard. Since an SMLLC is
"disregarded" for income tax purposes, mere liquidation of the SMLLC
might not have the desired effect on the M2M election. This is yet another reason to avoid the
SMLLC entity (as discussed elsewhere on the traderstatus.com website).
- As clients of firms promoting
the use of SMLLC's have been saying (in late 2006) on internet
bulletin boards: "My accountant apparently has a trader who is having
a problem with the IRS because of the LLC, and he's steering clients
away from this type of entity until the case is resolved. Actually it
is a single member LLC that is causing the problem. For some reason a
multi member LLC may not be a problem."
- To more easily, clearly and
legally show a break-up between one or more members of a group who
pooled together to operate the trading activity.
- Technical terminations can
occur when there is a change of LLC membership exceeding 50% over a
rolling 12 month period. Similarly, if LLC members exit
resulting in only one member owing a 100% interest, a termination can
occur.
LLC / Partnership dissolution for IRS purposes differs from State
Law.
(Harbor Cove Marina Partners Partnership v. Comr., 123 T.C. 64 (2004))
Under IRC §708 termination for tax purposes will not occur until either
no part of any business is being carried on by any of the partners or
more than 50% of the interests in the partnership are sold within a
12-month period. (also when all but one partner withdraw, and for
certain mergers of divisions)
Under
Reg §1.708-1(b)(1)
it is clarified that termination for tax purposes LLC / Partnership will not occur until
all assets (even including any remaining cash) are distributed to
the partners.
Whereas, in the area of corporate taxation it is generally accepted that a
corporation can be deemed to have completely liquidated even though it
maintains its charter and a nominal amount of assets, provided it is not
engaged in an ongoing business. The partnership rule is different;
in addition to ceasing business, a partnership must continue to file tax
returns as a going concern until it distributes all assets to the
partners pursuant to the partnership agreement.
Reg §1.708-1(a)
and
Rev. Rul. 71-129
and
IRM 4.11.7.4(2) Corporate Liquidations/Dissolutions
Dissolve an LLC with the CA Secretary of the State using these
links:
Use form LLC-4/8 to dissolve an LLC within 12 months of the date you
formed it by mistake
Otherwise use form LLC-4/7
http://www.ftb.ca.gov/professionals/taxnews/2010/April/Article_13.shtml
http://www.ss.ca.gov/business/llc/llc_faq.htm#question8
http://www.ss.ca.gov/business/llc/forms/llc-3_4-7_4-8.pdf
http://www.sos.ca.gov/business/llc/forms/llc-3_4-7_4-8.pdf
http://www.sos.ca.gov/business/bpd_forms.htm
New Beginning September 29, 2006, an LLC is
no
longer required to obtain a tax clearance certificate from the FTB
to cancel its registration with the CA SOS.
New starting with 2006 returns. When
filing a California Final return the $800 annual/minimum
franchise tax will continue to accumulate unless the business formally
dissolves with the Secretary of State within one year of filing the
final return. Please see "Cancelling"(sic) in the
565/568
booklet for further information.
New starting with 2005 returns. When
dissolving within a year of initial formation a special Short Form
Cancellation may be available. Please see "Short Form Cancellation" on
page #7 of the
568 booklet for further information. To terminate their legal existence, business entities registered with the California Secretary of State (SOS) can dissolve, surrender, or cancel their businesses in California as follows: - Domestic corporations (those originally incorporated in California) may legally dissolve.
- Foreign corporations (those originally incorporated outside California) may legally surrender.
- Limited liability companies and partnerships (both domestic and foreign) may legally cancel.
Entities may be able to avoid the minimum franchise tax or annual tax for current and subsequent years if all of the following requirements are met: - The entity filed its final franchise or annual tax return timely, including extension, for the preceding taxable year.
- Conducted no business after the last day of the preceding year.
- Filed the appropriate documents with SOS within 12 months of the filing date of their final tax return.
Steps to dissolve, surrender, or cancel a business entity: - File any delinquent tax returns.
- File the final/current year tax return. On this tax return's first page, write FINAL at the top of the page and check the box labeled "Final Return."
If you need our assistance, call us: Business entities 916.845.7057
Dissolve an LLC with the CT Secretary of the State using these
links:
http://www.sots.ct.gov/sots/lib/sots/commercialrecording/allforms/articles_of_dissol_-_domestic_llc.pdf
http://www.sots.ct.gov/sots/lib/sots/commercialrecording/allforms/cert_of_dissol_-_stock_corp.pdf
http://www.sots.ct.gov/sots/lib/sots/commercialrecording/allforms/guidelines_for_fax_filings.pdf
http://www.sots.ct.gov/sots/lib/sots/commercialrecording/allforms/fax_filing_service_request_form.pdf
http://www.sots.ct.gov/sots/lib/sots/commercialrecording/allforms/expedited_serv_req__all_.pdf
Cancel an LLC or Dissolve a corporation with the
DE Secretary of the State using these
links:
http://corp.delaware.gov/disso09.shtml
http://corp.delaware.gov/corpforms.shtml
Dissolve an LLC with the NY Secretary of the State using these
links:
Within 90 days following the
dissolution and the commencement of winding up the limited liability
company, or at any other time that there are no members, a domestic
limited liability company shall file articles of dissolution pursuant to
Section 705 of the Limited Liability Company Law.
The completed articles of
dissolution, together with the statutory fee of $60, should be forwarded
to the New York State Department of State, Division of Corporations, 41
State Street, Albany, NY 12231.
Dissolve an LLC with the
NJ Secretary of the State using these
links:
A business must be in good standing before the dissolution, withdrawal
or cancellation can be processed. If your business has been voided, you
will need to reinstate the business. The forms and fees for both
reinstatement and dissolution may be submitted together and the
processes will be performed concurrently. You may check the
status
of your business online. There is a $5.00 fee for this report. All
annual report obligations should be satisfied prior to the submission of
dissolution paperwork.
http://www.state.nj.us/treasury/revenue/dissforms.htm
Consequences of Not Dissolving a Corporation (you'll owe money)
http://www.state.nj.us/treasury/taxation/text/condissolvtxt.htm but
as of December 2008 this is a bogus URL. An URL that worked for me
is:
http://www.state.nj.us/treasury/taxation/condissolv.shtml
Closing operations in New Jersey
http://www.state.nj.us/treasury/revenue/dissolve.htm
http://www.state.nj.us/njbusiness/registration/filing/disolve.shtml
http://www.state.nj.us/treasury/revenue/dissolvewithdraw.htm
Note for entities continuing in business:
New Jersey apparently requires the entity to remember to log-in to
the NJ web site and pay the
annual fee. NJ gives out this URL to use:
http://www.nj.gov.njbgs but as
of September 2007 this is a bogus URL. The URL that worked for me
is:
http://www.state.nj.us/njbgs/
Dissolve an LLC with the
NV Secretary of the State using these
links:
LLC Articles of Dissolution ($75 fee)
http://sos.state.nv.us/business/forms/pdf/AM86.531Dissolutionpk.pdf
http://sos.state.nv.us/business/forms/omni/AM86.531Dissolution.pdf
Dissolution of
Corporation Sole ($50 fee)
http://sos.state.nv.us/business/forms/pdf/AM84Dissolutionpk.pdf
http://sos.state.nv.us/business/forms/pdf/AM78.580Dissolutionpk.pdf
http://sos.state.nv.us/business/forms/omni/AM78.580Dissolution.pdf
http://sos.state.nv.us/business/forms/pdf/AM78.575Dissolutionpk.pdf
Dissolve an LLC or Corp with the
MN Secretary of the State using these
links:
LLC Certificate of Dissolution ($35 fee)
http://www.sos.state.mn.us/docs/llcarticlesofdissolution.pdf
(not of much use, see instructions below for MSA 322B.80 Subd. 2 (5))
http://www.sos.state.mn.us/docs/llcdissolutionhandout.pdf
(information: 9:00am to 4:00pm Monday through Friday at 651-296-2803 or
toll free at 877-551-6767)
a commercial package that might be of use:
http://www.uslegalforms.com/mn/MN-DP-LLC-0001.htm
Corporation Articles of Dissolution ($35 fee)
http://www.sos.state.mn.us/docs/dcdissolutionsharesissued.pdf
Dissolve an LLC or Corp with the
PA Secretary of the State using these
links:
LLC Certificate of Dissolution ($70 fee)
http://www.dos.state.pa.us/corps/lib/corps/20/7/8975-8978.pdf
Corporation Articles of Dissolution ($70 fee)
http://www.dos.state.pa.us/corps/lib/corps/20/7/1977-5977.pdf
Dissolve an LLC or Corp with the
VA Secretary of the State using these
links:
Form LLC-1050 ($25 fee)
http://www.scc.virginia.gov/division/clk/forms/llc1050.pdf
Form SCC743 ($10 fee)
http://www.scc.virginia.gov/division/clk/forms/scc743.pdf
Form SCC750 ($10 fee)
http://www.scc.virginia.gov/division/clk/forms/scc750.pdf
The State Corporation Commission’s (SCC) Clerk’s Information System
(CIS)
SCC ID# is found here:
http://www.scc.virginia.gov/division/clk/diracc.htm
Other forms and Fees:
http://www.scc.virginia.gov/division/clk/fee_bus.htm
Dissolve an LLC or Corp with the
WI Secretary of the State using these
links:
LLC Certificate of Dissolution ($20 fee)
https://www.wdfi.org/_resources/indexed/site/corporations/form510.pdf
Corporation Articles of Dissolution ($20 fee)
https://www.wdfi.org/_resources/indexed/site/corporations/form010.pdf
Other forms and Fees:
https://www.wdfi.org/corporations/forms/
http://www.incorpservices.com/corporate-dissolution-llc-cancellation-withdrawal.aspx
A Traders
Tax Responsibilities
Colin M. Cody, CPA, CMA
TraderStatus.com LLC
6004 Main Street
Trumbull, Connecticut 06611-2400
(203) 268-7000
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