Tax implications of liquidating a corporation Los angeles cam chatting room

Posted by / 13-Sep-2017 19:11

Tax implications of liquidating a corporation

Trade secrets, special processes, patents and proprietary information are among an employer’s protectable interests, but how noncompete provisions create an employer property right isn’t clear.THE PRACTITIONER SHOULD ADVISE the client to terminate employment and noncompete agreements with shareholders before liquidation.THE CRITICAL ISSUE FOR TAX PLANNING is whether the assets distributed are considered property under IRC code section 336 and whether the corporation owns them.THE QUESTION OF WHO "OWNS" the clients and customer-based intangibles turns on whether there is an employment or noncompete agreement in effect at the time the intangibles are distributed.THE IRS SAYS DISTRIBUTIONS of customer-based intangibles to shareholders are taxable.When a firm or corporation distributes to its shareholders all of its assets, both tangible and intangible, and ceases doing business, the IRS says there is a taxable distribution of its intangible goodwill.

Selling stock in a C corporation will yield a capital gain or loss measured by the purchase price less the seller’s basis in stock.

As of 2010, the federal tax rate for long-term capital gains was 15 percent, a rate favorable to those whose stock increased in value after purchase.

Corporations, however, do not receive such favorable terms when selling assets. Cash paid to shareholders upon liquidation is also taxable.

If you decide to change to another form of business organization, close your operations permanently or sell your business to another, you will likely need to liquidate the corporation.

Every small business is different, and the tax consequences depend on several factors.

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However, it is possible to make certain generalizations.