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LLC tax information is needed in order to navigate the process of dissolving an LLC, which can be complicated if not handled properly. Part of the process that complicates the dissolution of an LLC involve understanding the distribution of assets to LLC members and filing the proper forms with the Internal Revenue Service (IRS).
Steps in the Process
The first step in the process of dissolving an LLC that can lead to complications is the distribution of ownership stakes to each of the LLC members or owners. Since a multi-member LLC is treated as a partnership, improper distribution of assets can lead to a larger than expected tax liability to a member of the LLC.
IRS Form 966
In addition to the distribution of the assets from a dissolved LLC, IRS Form 966, Corporate Dissolution and Liquidation, must be filed. This paperwork must be sent in order for the IRS to make a determination of any tax liability, both current and past due. Additionally state specific notifications and a notice to the creditors of the LLC must be completed. Any unpaid taxes will be assessed to each of the members of the LLC and if necessary attached by the IRS in the form of a garnishment or levy. This is due to the fact that an LLC member does not enjoy the same protections against claims like a shareholder of a C corporation and can be subject to liabilities for any unpaid taxes.
