Liquidating distribution return of capital
Black Creek Group’s real estate investment solutions have been distributed through Black Creek Capital Markets, LLC through banks, financial planning firms and brokerage firms since 2002 (previously as Dividend Capital Securities, LLC).
As a pass-through entity, S corporations distribute their earnings through the payment of dividends to shareholders, which are only taxed at the shareholder level.
Earnings are accumulated in a retained earnings account, but they are not considered earnings and profits (), since the income is taxed on the individual returns of the shareholders.
Every share of stock gives the holder an equal right to the retained earnings as any other share.
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If that does not cover the debt, they will recoup the balance from the company’s remaining liquid assets, if any. These include bondholders, the government (if it is owed taxes) and employees (if they are owed unpaid wages or other obligations).
Liquidation is the process of bringing a business to an end and distributing its assets to claimants.
Income is taxed only once, when the income is earned by the S corporation, whether the income is reinvested or distributed.
Unlike partnerships, S corporations are not subject to either the accumulated earnings tax or the personal holding company tax.
The debts still exist in theory, at least until the statute of limitations has expired, but there is no debtor to pay them, so they must be written off in practice.
Assets are distributed based on the priority of various parties’ claims, with a trustee appointed by the Department of Justice overseeing the process.
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So any rights to the distribution of retained earnings are represented by the number of shares that a stockholder owns, not on any agreement, as in a partnership.