The liquidation bonus: definition, calculation, distribution and taxation

When the partners of a Company decide to prematurely terminate their activity, they must proceed to dissolution. The early closing of society leads to a liquidation, during which end-of-life operations are performed and the result of fenced is calculated. There liquidation peut end by payment of a liquidation bonus.

Foundation-company-ricard offers you a complete file devoted to the liquidation bonus and answering the following questions:

• What is a liquidation bonus ?
• Which method to use to calculate a liquidation bonus ?
• How to distribute the liquidation bonus ?
• What is the income tax suffered by the bonus ?

Definition of liquidation bonus

Le liquidation bonus is a financial balance , promising dwelling at the end of the cessation of activity from a company. It appears when the company's assets are sufficient to cover all the debts, including those of the partners (share capital).

This benefit is recognized when fenced of a company. The circumstances of this closure can be voluntary or judicial. In all cases, a liquidator's mission is to carry out the tasks necessary for liquidation: the sale of assets, the collection of receivables and the repayment of debts.

Once his mission has been accomplished, he proposes to the partners to ratify the liquidation accounts, to release him from his mandate and to distribute the liquidation proceeds. The company must then be struck off from the list of commercial enterprises.

The liquidation bonus corresponds to the amount of money given to the partners at the end of the liquidation and which is greater than the sums they initially invested.

Each type of business legal status involves specific steps and formalities:

What is a liquidation bonus?

Le liquidation bonus is a extra profit , promising persists after the repayment of all debts and the disposal of assets upon dissolution of a company. In other words, when assets are sufficient to cover all obligations, including those of the partners (share capital), a liquidation bonus appears.

This profit is calculated at the end of the liquidation procedure. This can be voluntary or judicial. Be that as it may, a liquidator is appointed to carry out the necessary operations: the sale of stocks and fixed assets, the collection of receivables and the repayment of debts.

When the mission is accomplished, he invites the partners to approve the accounts of liquidation, to relieve him of his mandate and to share the liquidation bonus. The company must then be struck off of the trade and companies register (RCS).

The liquidation bonus is the amount which is returned to the partners at the end of the liquidation and which is greater than the sums they have invested.

Here are the steps to follow and the formalities to complete depending on the legal status of the company:

What does the liquidation bonus mean?

Le liquidation bonus is a financial surplus , promising remains when the company has liquidated all its debts, including those of the partners (share capital). It appears following the fenced of the company, whether this dissolution is voluntary or judicial.

A liquidator is then appointed to carry out the

How to calculate a liquidation profit?

Le liquidation profit or, more generally, the result of liquidation, is calculated from two people different ways. There exists a additive approach and an approach subtractive.

Calculation of liquidation profit with the additive method

As its name suggests, the additive method consists of adding up different items listed as liabilities on the liquidation balance sheet. Here, the result delivered by the calculation formula is greater than the share capital (otherwise, we would speak of liquidation malpractice).

Liquidation profit = reserves (legal, statutory, optional) + profit carried forward – loss carried forward +/- liquidation result

Calculation of liquidation profit with the subtractive method

Unlike the previous method, the subtractive method consists of making the difference between two variables: equity and capital. This is the method of calculating the liquidation profit most used in practice.

Liquidation profit = equity – share capital

How to divide a liquidation bonus?

Le liquidation bonus is immediately shared between shareholders. It is the subject of a division between the latter, according to the number of shares held by each of them. The sharing then takes place based on their equity stake social. The law allows, in certain circumstances, a different distribution. For one-person companies (SASU or EURL), the bonus does not have to be shared: it goes entirely to the sole shareholder.

A liquidation bonus can only benefit the managing partner of the company. In other words, if he has no securities, there is no profit.

Example : Suppose that the liquidation of an LLC produces a liquidation bonus of 10 euros. Its capital was divided into 000 shares of 1000 euros, made up of: 10 shares allocated to Mr. X, 510 shares to Mr. Y and 290 shares to Mr. Z. Here is how the liquidation bonus is shared:

What is the tax rate of the liquidation bonus?

Le return of capital to the partners is qualified as tax-exempt. Indeed, none royalty fee is due on all of the initial contributions.

Le liquidation bonus is analyzed for tax purposes as a dividend and is therefore taxed. I'Imposition varies according to the status of the beneficiary: natural person or legal person (company).

In addition, the closing minutes of the liquidation operations must be submitted to theregistration with the business tax service (SIE). In the case of the presence of a Cute, the latter is subject to a proportional rate of 2,5% (excluding single-member companies). Of the transfer taxes may also apply to specific operations.

Taxation of liquidation proceeds shared between natural persons

The liquidation bonus is subject to the same taxation as a dividend. Beneficiaries can then:

• Do not exercise any choice and submit the bonus to the single lump sum 30% (flat'tax) including an income tax installment of 12,8% and social security contributions at the rate of 17,2%;
• Or opt for a taxation at the progressive scale of income tax after application of an allowance (the rate that applies is the beneficiary's marginal income tax rate: 0%, 14%, 30%, 41% or 45% to which social security contributions should be added calculated without deduction).

In this second case, a fraction of the CSG paid is deductible from taxable income.

Taxation of liquidation proceeds paid to legal persons

When the beneficiary of the bonus is a legal person, it is theclassic profit tax which applies. No exemption currently exists.

In general, this is corporate tax, at the ordinary or reduced rate. In some cases, the "mother-daughter" regime may apply and thus reduce the tax burden.

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• Summary table of dissolution and liquidation formalities