In 2004 I started a plumbing business, ran it for about a year and a half, and decided to shut it down, so I paid all my bills and filed a final corporate return in 2006. My tax man gave me a dissolution form to send in.
I sent the form in and in 2008, I received a notice from the franchise tax board stating that I needed to file returns for 2007 and 2008. I called the Franchise tax board and explained the situation. They told me the corporation was still active, I had sent in the wrong form, and as long as the corporation is active, I have to file returns and pay minimum taxes even if there was no business. The corporation was finally dissolved in December 2009. Am I liable for these minimum taxes?
The corporation is liable for the minimum taxes. If you set the business up as a pass-through entity, then you will likely be liable for the minimum taxes.
The post at the link below addresses the issue that you are raising. Here is the most important sentence:
"Assuming that you go through the dissolution process properly and that you do not have any 'alter ego' problems, your personal liability generally will be limited to the amount of any distributions that you received at the time of dissolution."
It does not make any difference whether your corporation was a C or an S Corporation. Even in an S corporation, liability for taxes and other obligations do not pass through to the shareholders.
You will only have liability to the extent that you received corporate assets, barring alter ego or transferee liability issues. As a practical matter, the Franchise Tax Board doesn't often pursue shareholders for failure to pay corporate taxes.
Jeffrey Michael WebbBusiness AttorneySan Diego, CACA licensed ·
A corporate shareholder is generally not personally liable for the debts and obligations of the corporation, even if those debts are owed to the Franchise Tax Board.
A shareholder can, however, be held personally liable under the "alter-ego" theory of liability if he failed to run the corporation as a separate legal entity. This can occur when shareholders fail to distinguish their personal finances from that of the corporation, and do not comply with corporate formalities.
