I own a dormant corporation which I’m planning to dissolve this year. Do I still need to file?

Just to be safe, you need to file for this corporation for the year in question.

Corporations that haven’t experienced any activity don’t necessarily qualify as dormant. In order to qualify as dormant, no shares can have been acquired or disposed over the course of the year.

You must report the acquisition or disposition of any shares on Form 5471.

There is a confusing clause in the instructions which is often misinterpreted:

No shares of the foreign corporation (other than the directors’ qualifying shares) were sold, exchanged, redeemed, or otherwise transferred, nor was the foreign corporation party to a reorganization.

Which logically leads to questions like this:

I founded the corporation. I am the president and all the initial shares were issued to me at company founding. Does this mean that I am the director and therefore the shared activity is exempt?

The quote referenced above means that issuing qualifying shares to directors is an exempt event and a corporation may remain dormant if no other events occurred.

However, the director wears many hats. You are not only the self-appointed director.  You are also a shareholder. Acquisition and disposition of shares by a company shareholder is the major reportable event. Because of this, companies are not considered dormant in the year when they are created and in the year when they are dissolved.

Did this answer your question? Thanks for the feedback There was a problem submitting your feedback. Please try again later.

Still need help? Contact Us Contact Us