There are many reasons to dissolve a California business. As a business owner, you may need to close your doors to avoid bankruptcy. You may want to retire or open a new venture. Business owners may need to know how to dissolve a business in California for a variety of reasons. Proper dissolution of your business is extremely important to your future success, no matter what the business’s financial situation is upon closing. If your business isn’t properly dissolved, the state may still expect you to file taxes, annual reports, and other filings.
If you fail to properly dissolve your California business, there may be fines or financial penalties for you as well as the business. It could also negatively impact business owners’ or members’ credit and future business ventures. We’ve compiled some helpful information to ease the confusion around how to dissolve a California business so you know what to expect.
And as you get ready for your next venture, we can help you prepare with our fast, easy California limited liability company (LLC) formation service and California incorporation formation service. We can help make doing business in California easy through the whole lifecycle of your business.
As the old saying goes, an ounce of prevention is worth a pound of cure. This is true in business as well as in medicine. The key document that tells the state you want to close your business is called Articles of Dissolution in California. You’ll need to have a clear record of your business information to prevent any issues as you prepare to file this document. If you don’t have a record of all of your assets and liabilities, you may encounter difficulty in your California voluntary dissolution. Don’t put yourself in that situation. This is why keeping a secure and thorough record of all business dealings is important.
When dissolving your California business, you’ll need to value your real estate, inventory, assets — basically everything about your business. Don’t be afraid to hire a professional if you’re not sure how to value things. To dissolve a California business, you’ll also need to gather all documents related to business operations. Focus especially on locating your contracts with third parties and your tax information
A good way to make sure your business stays compliant and up to date is through our Worry-Free Compliance Service, which can help you throughout the life of your California business. In addition, our ZenBusiness dashboard keeps your business documents organized to make gathering dissolution information easier.
As you prepare to dissolve your California LLC or corporation, you’ll need to understand your company’s debts. Just because you are closing your business doesn’t mean debts disappear. Possible legal repercussions for not handling your company’s outstanding debts include:
As you can see, it’s very important to understand what your business owes as you go to close your doors. Having a handle on this information will help ease the process as you dissolve a California corporation or LLC.
Dissolving a California LLC is a two step process. First, you’ll need to file a Certificate of Dissolution (Form LLC-3). Then, you’ll need to file a Certificate of Cancellation (Form LLC-4/7). In the event all the members of your company vote to dissolve, then you only need to file a Certificate of Cancellation. You file these documents with the California Secretary of State.
Dissolving your California corporation follows a very similar process. You’ll first need to file a Certificate to Wind Up and Dissolve (Form ELEC STK). Then, you’ll need to file a Certificate of Dissolution (Form DISS STK). If all of the outstanding shares of the corporation vote to dissolve, then you only need to file a Certificate of Dissolution.
Your company’s own internal governing documents can be a great guide to a successful California dissolution. You can refer to your LLC’s operating agreement or your corporation’s bylaws for dissolution instructions. California is one state that requires you to keep your governing documents on file with the state.
We can provide LLCs with a California operating agreement template to help you customize an operating agreement for your business during the formation process. Having a comprehensive operating agreement that has been tailored to your business makes dissolution easier. But remember, no matter what your governing documents say, you must still file the proper dissolution paperwork with the state.
When you formed your California business, you probably also applied for a variety of federal, state, and local permits or licenses. All of those were likely essential to get you started. As you think about how to dissolve a business in California, you’ll need to terminate those licenses. Some permits and licenses renew automatically each year, so make sure you know the renewal dates. Cancel licenses as soon as you are reasonably able to do so. You don’t want to be stuck with costly renewal liabilities as your business shuts down.
As you wind up your affairs, confirm that you understand state and local employment obligations if you have employees. Consult with a California employment lawyer if necessary. Some California municipalities, like Los Angeles and San Francisco, have specific rules that employers must follow when terminating their workforce. Be certain you understand the rules, since any misunderstanding can delay your ability to dissolve your California business.
You also need to file final tax returns. This includes both state and federal returns, if applicable. Once that is complete, you’ll be able to cancel the business’s EIN.
After you’ve taken care of all the logistics like locating all the paperwork, and taking a vote of the members or shareholders, then you can file the Certificate of Dissolution. You can file it electronically with the California Secretary of State’s office. You can also file by mail.
We’re here to help you with your California business needs, from day one through dissolution. We can help you quickly and efficiently form your LLC or corporation. Our Worry-Free Compliance Service has also helped many business owners keep track of all their business documentation, making transitions through the different phases of business a breeze. Whatever your business needs are, we’re here to help you.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
You’ll need to file a Certificate of Dissolution for either a corporation or LLC.
Costs can vary greatly depending on the reason your company is shutting down and what information needs to be gathered to help you dissolve.
Timing is dependent upon gathering and providing the correct information to the Secretary of State.
The process is extremely similar to dissolving a for-profit corporation or LLC in California. It just requires a slightly different form. However, in some circumstances, like for dissolving a nonprofit public benefit corporation, you may need to get a letter from the California Attorney General. In those cases, the Attorney General would waive any objection to the dissolution of the company.
California Business Resources
Business Dissolution by State