Terminating a New York S Corp

by David Carnes

A corporation is considered an independent legal entity under New York state law. S corporation status is an IRS tax classification. Once of the consequences of corporate independence is that if you want to dissolve a corporation, you can't just lock the doors and walk away. Before New York will consider your corporation legally dissolved, you must satisfy state authorities that certain formalities have been completed. You must also notify the IRS.

Internal Matters

New York corporate law requires shareholder approval to dissolve a corporation of perpetual duration or to dissolve a corporation of limited duration before its scheduled termination date. If the corporation was formed after February 28, 1998, a majority vote of all issued and outstanding shares is required unless the Certificate of Incorporation provides otherwise. If the corporation was formed on or before February 28, 1998, a two-thirds majority of shares is required unless the Certificate of Incorporation provides otherwise. If the corporation is of limited duration, it automatically dissolves when its term expires and no shareholder approval is required.

State Tax Certification

Corporate dissolution in New York requires a tax clearance certificate from the state Tax Department. To obtain a tax clearance certificate, the corporation must file its final state tax return and check the box on the return marked "final." The Tax Department will then check to make sure the corporation has filed all its tax returns and that there are no outstanding taxes or maintenance fees. It will then mail a tax clearance certificate to the corporation's registered address.

Submitting a Certificate of Dissolution

To dissolve a New York corporation, you must complete a Certificate of Dissolution and submit it to the New York Department of State along with two copies of the tax clearance certificate and a filing fee, which is $60 as of the date of publication. The Certificate of Dissolution is a short form requiring only basic information, and it can be downloaded from the website of the New York Department of State. These documents must be submitted by surface mail -- they cannot be submitted online.

Dissolution in Other States

If the corporation is registered to do business in other states as a "foreign corporation," it must comply with state law concerning the procedure for withdrawing its registration.

Dealing With the IRS

An S corporation registered in any U.S. jurusduction must file its final tax return, Form 1120S, and Form 966 before the IRS will recognize its dissolution. Form 966 is a one-page document that requires basic information about the corporation.