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Find out how creditors apply for compulsory liquidation.

If your company is liquidated because it’s insolvent, you will need to cooperate with the liquidator and follow certain rules.

It will be removed (‘struck off’) from the register at Companies House, which means it ceases to exist. For a solvent company whose directors have decided to stop trading it’s members voluntary liquidation.

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(There is a different guide if you want to wind-up a partnership).

Liquidation will stop the company doing business and employing people.

Upon liquidation of a partnership, the Internal Revenue Service views the distributions as a sale of a partnership interest; as a result, gains are generally taxed as long-term capital gains to partners.

Therefore, partners who have held an interest in the partnership for more than one year as of the date of a liquidating distribution will pay lower rates of tax on the gain than they do on a partnership's operating profit.

As a result, the tax effects of a partnership that makes liquidating distributions only impacts the partners who receive them.

To be taxed as a liquidating distribution, however, a partner's interest in the partnership must terminate.

Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.

This publication is available at https://uk/government/publications/guide-to-liquidation-winding-up-for-directors/guide-to-liquidation-winding-up-for-directors Liquidation legally ends or ‘winds up’ a limited company or partnership.

Instead, gain or loss is delayed until you sell the property.

Provided the liquidation terminates your entire interest in the partnership, your tax basis in the distributed property is equal to your adjusted basis in the partnership interest minus the cash distributed to you.

Before you can figure out the tax effects of the liquidation, you'll need to know your adjusted tax basis in the partnership.

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