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Check with your state’s finance/revenue/tax department as well as the department of state for procedures to follow.Any closing business must file an annual tax return for its final year.Tax Treatment of S Corporation Liquidations Under Code Sec.1371, except as otherwise provided in the Code, and except to the extent inconsistent with subchapter S, the provisions relating to C corporations apply to an S corporation and its shareholders.All business tax eligibilities for the corporation will be ended as of the date the request for dissolution is received and accepted by the Division of Revenue. The required forms and a description of the process can be obtained from the Division of Revenue's Web site.However, prior tax liabilities will still apply and be subject to the Division of Taxation's review. -18 and other applicable provisions of the Law any officer or director of any corporation who distributes or causes to be distributed any assets in dissolution or liquidation to the stockholders without having first paid all corporation franchise taxes, fees, penalties and interest imposed upon said corporation, shall be personally liable for said unpaid taxes, fees, penalties and interest. Whatever the reason, the process is essentially the same.By law, certain steps must be taken to terminate a business, and there are tax consequences for this type of exit strategy.

If dissolution procedures are not completed, and full payment of the outstanding liability is not received, the case will be forwarded to the Special Procedures Branch, Judgment Section, for further collection action.

According to the IRS, it is seeing these conversions where the S corporation's primary business is property development or homebuilding.

Often the current fair market value of the property is lower than the outstanding liability associated with the property.

S corpora­tions typically are more expensive to organize and require greater attention to the maintenance of corporate formalities than is required with partnerships.

However, the corporate form usually provides owners with a greater degree of insulation from business liabilities than does the partnership form.

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