How to Close an S-Corporation in North Carolina

By Elizabeth Rayne

To close an S corporation, or S corp, there are a number of steps you must take to ensure that the corporation has settled its debts and will no longer be liable for taxes. Both the board of directors and the shareholders must agree to close the corporation. You should inform all business associates, creditors and consumers about the dissolution, and ensure that all business debts and wages are paid. Finally, you must notify the state and file final tax returns.

To close an S corporation, or S corp, there are a number of steps you must take to ensure that the corporation has settled its debts and will no longer be liable for taxes. Both the board of directors and the shareholders must agree to close the corporation. You should inform all business associates, creditors and consumers about the dissolution, and ensure that all business debts and wages are paid. Finally, you must notify the state and file final tax returns.

Vote for Dissolution

Both the board of directors and the shareholders have a say in whether or not to dissolve the S corp. The dissolution process begins when the board votes to submit a proposal for dissolution to the shareholders. The shareholders then vote on the proposal. Unless otherwise specified in the bylaws or articles of incorporation, North Carolina law requires a majority vote by the board and the shareholders to close the corporation.

Ready to incorporate your business? Get Started Now

Winding Up Business

Once the corporation has decided to dissolve, you must notify all business associates and creditors of the decision. The board should form a plan to settle all remaining debts, and include a plan to set money aside to pay final taxes. You must ensure that all the employees of the corporation are paid their final paychecks when due. You must also contact customers who may owe money to the business.

Distribution of Assets

If there are remaining assets after the corporation has paid off debts and set aside income for taxes, the rest of the assets must be distributed to the shareholders. The amount each shareholder receives must be proportional to the shareholder's interest in the company. You should review the articles of incorporation and the bylaws to see if there are any provisions regulating how assets are to be distributed to shareholders upon dissolution.

Articles of Dissolution

You must file articles of dissolution with the North Carolina Secretary of State to notify the state that the corporation will no longer be doing business. You may obtain the articles of dissolution form on the secretary of state website. If your corporation has not issued shares to stockholders, you will file the "Articles of Dissolution Prior to the Issuance of Shares" form. Otherwise, file "Articles of Dissolution by Board of Directors and Shareholders." On the form, you must include the name of the corporation, names and addresses of the officers and directors, the date of dissolution, and a statement that the shareholders approved of dissolution. You must mail the form to the corporations division of the secretary of state with the appropriate fee.

Taxes

There are a number of IRS forms that you must submit upon the dissolution of the corporation. If the corporation has employees, you must issue final W-2 forms to each employee with wage and withholding information, and provide W-2 information to the IRS on form W-3. The S corp must file any annual or quarterly employment tax on IRS Forms 940 and 941. A dissolving S corporation is required to file form 966 with the IRS within 30 days of the corporate resolution to dissolve. Further, you must file the final S corp income tax return on form 1120S within 3 months after the dissolution date. Further, If your S corp collected sales taxes, you must submit the final forms and funds due up until the dissolution date to the North Carolina Department of Revenue.

Ready to incorporate your business? Get Started Now
Maryland Rules for Dissolving Non-Profits

References

Resources

Related articles

Closing an S Corporation in Georgia

S corporations are business entities that are closely held by a small number of shareholders. All corporations must follow the same dissolution procedures, but an S corporation is typically less expensive to dissolve than a C corporation because any gains on the distribution of corporate assets are taxed only once in an S corporation – at the shareholder level. Because Georgia corporations must register with the Georgia Secretary of State, the corporation must also formally file appropriate dissolution paperwork. If your corporation has not issued shares and has not “commenced business,” you can simply file Articles of Dissolution with the Georgia Secretary of State. Otherwise, you must file both an Intent to Dissolve and Articles of Dissolution.

Dissolution of Incorporation

In some cases, dissolving a corporation is more complicated than setting one up. A corporation that is winding down operations must follow state law on business dissolution. This usually involves filing the proper articles with a business regulator, often the secretary of state or division of corporations. There are requirements on final reports, tax returns, distribution of assets and the redemption of shares.

How to Change a Corporation From Nonprofit to Profit

A nonprofit organization is a public entity. Unlike a for-profit corporation, a nonprofit is not owned by individuals and it cannot simply convert to a for-profit business. Its officers and employees may manage the organization's day-to-day operations but they have no ownership interest. When a nonprofit corporation is formed, its organizing documents must state that the organization's activities will not benefit any particular individual, and upon dissolution, the assets must be distributed to another nonprofit. If you no longer want to operate as a nonprofit, you must dissolve the organization and form a new corporation.

LLCs, Corporations, Patents, Attorney Help

Related articles

How to Close a Corporation With the IRS

A corporation is a business entity that is legally distinct from its shareholders. This means that, in addition to the ...

The Dissolution of an S Corp

An S corporation is a corporation that is subject to special IRS taxation rules. Except for certain taxation issues, ...

How to Dissolve a Corporation With Votes in California

Voting to dissolve a corporation is one step of many in closing a California business, although it is an important ...

Dissolving Articles of Incorporation in Indiana

Dissolving your Indiana corporation requires filing a document called Articles of Dissolution with the Indiana ...

Browse by category