Business owners must meet New York state's filing regulations when forming a corporation; conversely, they must also comply with the state’s requirements to dissolve the business.
Even if there was little to no business activity during the corporation’s lifespan, the New York State Department of State will not recognize a corporation’s dissolution until it creates and files a Certificate of Dissolution. A New York corporation can dissolve voluntarily or involuntarily, as by a court order.
Domestic Business Corporation in New York State
Domestic corporations are those created under New York state laws. They pay state income franchise taxes for the privilege of deriving receipts from activity, doing business, employing capital, exercising their corporate franchise, maintaining offices, or owning or leasing property in New York.
Domestic corporations must file state tax returns and pay any fees or taxes due until they formally dissolve, regardless of whether they do any of the above in or outside of the state.
Filing and Paying Taxes Before Winding Up
Both the New York State Department of State and the New York State Department of Taxation and Finance are involved in the dissolution process. Voluntary dissolution ceases a corporation’s existence and eliminates the business’ obligation to file and pay taxes and fees to the state going forward.
However, a domestic corporation that voluntarily dissolves does not stop filing and paying taxes and fees if it continues to conduct business, even if only outside of New York.
Voluntary Dissolution Requirements in New York
When voluntarily dissolving in New York state, a corporation must file a final corporate tax return. The person filling out the form checks off “final” at the top of the return. The corporation may e-file its final return using tax department's approved software and must use the current year’s tax form if it is available.
If it isn’t available, the corporation may file a short period report with the previous year's form. The corporation's tax computation must account for any new tax laws effective in the final year and tax payments must be submitted in conjunction with those laws.
The Corporate Filings Must Be Up to Date
When the New York State Department of Taxation and Finance receives the corporation’s final return, it makes sure that the business' returns and taxes are updated, including those due for any time during which the corporation existed.
If the corporation is up to date on its returns and tax payments, the department will issue its written approval to dissolve. If it is not current with taxes, the department sends the business a letter stating the requirements it needs to meet before consent to dissolve can be given.
Creating and Filing a Certificate of Dissolution Form
With consent from the Department of Taxation and Finance, the corporation must create a Certificate of Dissolution for the New York State Department of State, which has blank certificates and detailed instructions on how to fill them out and file them. The corporation’s filing must include:
- Department of Taxation and Finance’s written consent (Consent to Dissolution of a Corporation Form, TR-960).
- Certificate of Dissolution.
- Check for $60 filing fee payable to the New York State Department of State.
Applicants can file in person or mail their returns and payments New York State Department of State, Division of Corporations, State Records and Uniform Commercial Code, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.
These forms can also be faxed with a Credit or Debit Card Authorization Form to the Division of Corporations office at 518-474-1418. Once the department accepts these forms, it issues a filing receipt to the corporation, which is proof of the dissolved corporation’s end.
Proclamation of Corporate Dissolution
If a domestic corporation doesn’t voluntarily dissolve, file a tax return, or pay franchise taxes for at least two years, the New York Secretary of State’s Office (NYSOS) can dissolve the business through a proclamation. A corporation does not request a dissolution by proclamation.
When a business is dissolved by proclamation, it must continue to file and pay tax returns until it either completes the voluntary dissolution process or is reinstated.
Reasons for Involuntary Dissolution in New York
A business can involuntarily be dissolved in New York for two main reasons. The first is a deadlock between directors or shareholders. The court may dissolve a business if a proceeding brought by individuals with at least 50 percent of the corporation's voting shares states that:
- Votes required for action by the corporation’s board of directors cannot be acquired because the directions are too divided about the corporation’s management.
- Votes needed for electing directors cannot be acquired because the shareholders are too divided.
- There is dissension internally, and at least two shareholder factions are so divided that the corporation’s dissolution would benefit the shareholders.
The second reason is a special circumstance. On a petition filed by individuals holding at least 20 percent of the shares of a corporation not publicly traded or registered, according to the Investment Company Act of 1940, the court may dissolve the business if those controlling it are found guilty of fraudulent, illegal or oppressive actions against the shareholders.
The court may also involuntarily dissolve the business if its assets or property are diverted, looted or wasted for noncorporate purposes by those in control, including the corporation directors and officers. In a proceeding to dissolve a corporation, the other shareholders can buy the petitioners’ shares with the court’s approval of the sale terms and conditions and at fair value.
Michelle Nati is an associate editor and writer who has reported on legal, criminal and government news for PasadenaNow.com and Complex Media. She holds a B.A. in Communications and English from Niagara University.