Posted by Rich-CA on October 16, 2007 at 12:07:26:
Lots of options here. Yours are one of the few posts I save because I might have to consider one of these options in the future.
My LLCs are all single member. The subs are owned by an LLC (which I call, using all the originality I can muster, HQ). This LLC is owned by our family trust. Which is where the joint ownership comes back into play.
LLC dissolution -CPA, Attorney stumped … - Posted by Frank Chin
Posted by Frank Chin on October 15, 2007 at 07:11:16:
I had a business run in an LLC, had a CPA do the taxes, with an attorney handling legal matters and the closing on the sale of the business.
I know we all talked often about using LLC’s, and CPA’s and lawyers to handle things. So, here we’re wrapping up the business, and I’m asking for their advice.
I’m told what I have to do is:
File the final Federal and State tax returns, close bank accounts. We already done the final sales tax returns, cancelled out the insurance, collected all the receivables that we can collect, and kept the bank accounts and the credit line open till now.
File paperwork for the “dissolution of the LLC”. But the wrinkle here is pending issues and lawsuits if any, and what happens after dissolution with these open issues. We in fact had an accident in the business, and the worker filed a claim against our insurance company, though it was against the wrong company, the predecessor company that I bought the business from.
I checked with my CPA/attorney:
What happens with pending lawsuits and if there is any need to keep a company open, and for how long?? Says he does not know the answer to that, but can research for me. Said off the top of his head, I might be personally liable if the company is closed with a pending lawsuit.
Asked him what happens if a lawsuit is filed against the wrong entity. He said just send him the paperwork, which he’ll keep, and do nothing as we have no obligation.
Asked CPA about filing final tax return with pending issues, particularly the possibility of to paying future legal and accounting fees etc. He says he’ll think about it.
Chatted with the wife who did bank lending, and said can run it as a dormant business, still file tax returns, though franchise taxe can run at a lower rate that an active one. Not sure if this is the best approach.
My attorney says he can research the issues involved, which I submitted to him in a fax, and charge me a few hours of his time, and issue me an opinion. Says from the looks of it, it’ll be between $500 to $700 work.
I know we tell people here to use an attorney and only general advice can be dispenced here.
So the general questions are:
And feel free to throw in your opinion on other issues in this situation.
Of course, there’s always checks and payments coming in years after a business closed, like a “state refund” which came by over two years after the predecessor company closed. We helped the prior owner, notified him, deposited the money into our account that had a similar name, and mailed a check to him personally. The current owners said they can do the same for me. How kosher this is, I don’t know.
Thanks.
Frank Chin
Re: LLC dissolution -CPA, Attorney stumped … - Posted by Rich-CA
Posted by Rich-CA on October 15, 2007 at 19:01:54:
When we closed our C-Corp we had to state who would be responsible for outstanding obligations. The state of CA sent us a form and we filled it out and sent it back.
Re: LLC dissolution -CPA, Attorney stumped … - Posted by Frank Chin
Posted by Frank Chin on October 16, 2007 at 10:10:24:
Rich:
Thanks for the answer.
I went thru issues legal with my attorney, and he tells me that there’s a statute of limitation of 3 years for people suing for injuries. The question becomes one of what happens if someone files suit and the company was termintated.
Am I off the hook??
My attorney’s answer was he’ll have to research the issue for $500.00 to $700.00. He thinks I might lose the liability shield if I terminate it, but I can reactivate the company if needed.
Another way for me is to take my wife off as a member and file as a SMLLC, paying $100/year in fees rather than $800/year, and skip doing a 1065. Otherwise I’ll pay $800.00/year waiting for people to sue me.
Another approach is NOT to pay the LLC fees, and my attorney tells me the state will then terminate it for me by “proclamation”, and I can reactivate it if needed paying the back fees.
But then, could I file a “final” income tax return if I keep the company open??
It’s an issue that’s floating betwenn my attorney and CPA now.
Don’t mind paying the attoreny fee if I get the right answer.
Frank Chin