My wife and I opened an s-corp in CA in 2006. It's a tiny, home based / internet based business, with my wife and I as the sole "officers" and "50/50 shareholders". I can't remember if we broke even or maybe even had a small profit that first year - but I do know that we have not made money since - the past few years have been at a loss (due to a very tough economy), though not big enough to have any benefits of writing off losses or anything like that. We finally closed the company last year in Oct of 2010. We have filed every year (1120s, etc) and filed and paid the Franchise Tax
Board's Minimum taxes
of $800, and every year it makes us more frustrated - that small business owners in california have to shell out $800 when they are struggling to stay alive and making no money. The question is as follows: Two seperate attorneys - both friends of the family, one of which is a Tax Attorney, have told us:
"if you are done doing business - closed up shop last year, and never intend to do business as that company again - simply do not file / pay the Franchise tax return / minimum tax of 800. All that will happen is that they will "Suspend" the company, which means that it cannot operate or do business in CA again until (if ever) the corporation pays the minimum tax it owed plus any applicable fees and penalties. Many many small businesses that go out of business every year simply cease to exist and dissappear, and do not pay the FTB Min 800, and nothing happens to them personally - the corp is simply suspended and cannot ever again operate"
We do NOT want to cut another check to the FTB for another $800 if we do not have to. It's ridiculous that corporations are taxed when they don't make money in the first place. I want to know this: are there any other "personal" consequences to simply not filing this and letting it go? Can they garnish our personal bank accounts, etc? I know they probably threaten to do a lot of things - but what is the reality?
If what they told us is true, do we also NOT file a state return (since we are not taking the minimal losses against income)? I know we have to file a final 1120s, but do we file any state return if we don't file the franchise tax return? Or are they one in the same?