Article Date:
June 2023

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Shutting Down Your C Corporation

If you run your business as a C corporation and are ready to shut it down, you probably face the federal income tax issues that arise from a complete corporate liquidation.


This article explains the basic tax results for the corporation and its shareholder(s), like you.


Here goes.


“Complete Liquidation” Defined


For federal income tax purposes, a complete liquidation occurs when the corporation



ceases to be a going concern,


winds up its affairs and pays its debts, and


distributes its remaining assets to the shareholder(s).


For federal income tax purposes, distributions to shareholders in complete liquidation of a corporation mean one or more distributions in redemption of all the corporation’s stock pursuant to a plan.1


While you don’t need a formal written plan for distributions in complete liquidation, we strongly recommend having one because it



fixes the date that the liquidation process begins,


creates a dividing line between regular dividend distributions (if any) and liquidating distributions, and


shows (for liquidations that take more than one tax year to complete) when a series of liquidating distributions begins and ends.


Complete Corporate Liquidation Basics


You can accomplish a complete liquidation of a C corporation in three ... Log in to view full article.

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