Also, check with your state for any final employee-related returns that need to be filed.
If you have independent contractors that were paid at least 0 during the business’s final year, file Form 1099 for each. If the business has a qualified retirement plan, it must file a final return for the plan on Form 5500, , to ask the IRS for a determination of the plan’s qualification status at the time of the termination.
State law dictates the type of vote required to terminate a corporation.
The fact that it is the business’s final return is noted on the return (check the box for this purpose near the top of the form).
Also, check the “final return” box on the Schedule K-1, No tax items need to be prorated for the period of time that the business was functional.
The buyer will be arguing for an allocation that favors depreciable assets (such as equipment) rather than assets that will just be sitting on the books (such as goodwill).
A sole proprietor can decide on his/her own to close up shop, but entities formed under state law require more formality.
“Liquidation Sale.” When you’re not involved, you can only guess what led up to it. the operation may be unsuccessful and not worth sustaining.
an owner may have died and the family wants to liquidate the business…
The IRS has created various asset classes for this purpose, and an allocation must follow this fixed order…
• The different classes get different tax treatments.
For example, if you paid an annual membership fee and close your business after eight months of the subscription year, you still get to write off the full year’s subscription.
You started your business in January 2004 and paid ,000 in start-up costs. On your 2007 return, you can deduct ,000 — the remaining unamortized start-up costs.
For the seller, it is advantageous to negotiate for allocations that favor assets that will produce tax-favored capital gains (goodwill, for example), rather than ordinary income (such as stock-in-trade).