Clearance Certificate

AAA

DEFINITION of 'Clearance Certificate'

A certificate that verifies that an entity has paid all its tax liabilities at the time that the entity ceases to exist or is transferred to a new owner. A clearance certificate is not required in all jurisdictions.

INVESTOPEDIA EXPLAINS 'Clearance Certificate'

There are many different situations to which a clearance certificate may apply. A business may be required to obtain an income tax clearance certificate when it decides to dissolve. An estate whose assets have a high value may be required to obtain an estate tax clearance certificate when the estate owner dies and the estate's assets are distributed to heirs. A sales tax clearance certificate allows someone purchasing an existing business to ensure that they will not be responsible for any unpaid sales taxes upon becoming the business' new owner.

RELATED TERMS
  1. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  4. Sales Tax

    A tax imposed by the government at the point of sale on retail ...
  5. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
  6. Personal Representative

    The executor or administrator for the estate of a deceased person. ...
RELATED FAQS
  1. What are the most common business deductions and expenses for small businesses?

    Among the most common expenses and business deductions for small businesses are the expenses of getting the business started, ... Read Full Answer >>
  2. In what situations would a loan to an S Corporation from one of its principals be ...

    When a principal of an S corporation pays money into the business, vastly different tax consequences exist depending on whether ... Read Full Answer >>
  3. When is litigation better than mediation in a high net worth divorce case?

    Typically, litigation is better than mediation in high-net-worth divorce cases for two major situations – when there are ... Read Full Answer >>
  4. Can a Limited Liability Company (LLC) issue stock?

    A limited liability company, or LLC, cannot issue stock. Instead, an LLC is structured to have single or multiple owners ... Read Full Answer >>
  5. Which factors drive the marginal propensity to consume?

    A limited liability company (LLC) is not a separate entity from its business owners but is instead considered a pass-through ... Read Full Answer >>
  6. What are the advantages to registering a Limited Liability Company (LLC) in Delaware?

    When a small business determines that a limited liability company (LLC) is the most suitable business structure under which ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Prepare To Sell Your Business

    Follow these tips to ensure you get the most out of your hard work.
  2. Retirement

    6 Estate Planning Must-Haves

    You need an estate plan even if you don't have significant assets. Learn what you need to include in yours.
  3. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  4. Taxes

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  5. Entrepreneurship

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  6. Personal Finance

    Get Ready For The Estate Tax Phase-Out

    Changes to federal legislation will affect how your assets are treated once you're gone - be prepared.
  7. Taxes

    Estate Planning for a Surviving Spouse

    Estate planning for surviving spouses can be difficult for a number of reasons, so it's important to have good support and financial advice.
  8. Taxes

    3 Secrets You Didn't Know About Estate Planning

    Every advisor and saver needs to know these three estate planning secrets.
  9. Professionals

    Why Advisors Should Sidle Up to Estate Attorneys

    Financial advisors who building relationships with estate attorneys can better help all parties.
  10. Professionals

    Estate Planning and Elderly and Passed Clients

    By keeping up with new estate tax rules, financial advisors can help elderly clients save big on tax costs.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!