Once you have incorporated as a company the company has to fill tax returns and possibly accounts. Even if you don't have customers, incorporating allows to file business expenses and to carry losses forward (mileage may vary by jurisdiction).
Well sure :) but we expected to pay a "normal" fine, not $60,000 right away. Especially since we had zero revenue. Today we would do many things differently...
You don't say why you incorporated in the US... Much cheaper to incorportate in the UK, it seems (especially if you include fines and wind down, from what you wrote). I believe that filing tax returns (and accounts) is pretty much an universal requirement, as mentioned, anyway.
Good question. We have considered all options. But the company cannot be officially closed without paying all taxes/fines, etc.
At the same time, with a C corp, only the company itself is liable for taxes and fines, not its founders. If a company does not have sufficient funds, it cannot operate, and there is a process for automatically dissolving the company (after several years, if you have no outstanding obligations to third parties, no fraud intentions, etc.). We didn't want to do this and be left with an unpaid bill in our minds.
> "Hey, the federal portal says we owe $60,000 in penalties for not filing a tax return."
That doesn't sound like they're asking you to pay tax on your $0 income business. It sounds like you need to pay a fine for not filing a tax return.
What's a "normal" fine anyway? The point of having a fine being a large sum of money is to create incentive so you to do the thing they want you doing, which you didn't do.
When we logged into the tax portal, only this amount was shown as to pay. Terrible UX.
In fact, the fine was actually what we paid (minimum tax + missed deadline + interest).
“Normal fine”: We just didn't expect you to be able to incorporate a company and if you miss the tax payment deadline, you will receive a fine 100 times higher than the cost of incorporating the company, no matter what.
But of course, I don't recommend our way. Don't do it. It was wrong. Pay your taxes. Fill out all the required documents.
Are you sure this was the Federal tax portal, and not the Delaware Franchise tax? As far as I know, only the latter defaults to a "scary" tax calculation based on number of shares (but you can easily switch it to the Assumed Par Value Capital Method based calculation, which would be $400 in total for you, assuming you filed on time).
Federal taxes should be $0 if you had no profits.
This is 100% about Delaware Franchise Tax and is a rite of passage for all first-time founders. (There is no portal you can log into to view your federal taxes owed.)
Here’s a detailed writeup I prepared a while back about exactly how to resolve this if you want to DIY it. (This is one of the very few filings I actually recommend you DIY.)
I wonder what he meant by "days and nights reading IRS docs"...
But seriously, any AI tool could have explained exactly what was going on and what to do. I'm not even sure how he got to "$1500" since it's $400 + $200 late fee + 1.5% monthly interest. Maybe he missed 2 years?
