California LLC Dissolution Guide:
1. Resolve to Dissolve:
Once you have decided to close your LLC, you will have to hold a formal meeting of the Board of Directors requesting to dissolve the LLC. Once the vote to dissolve has been approved, it must then be authorized by a majority of the LLC’s shareholders (if there are any). A written agreement approving the LLC dissolution must be signed by all corporate owners and completed before filing for dissolution with the CA Secretary of State. ** Please not that a CA LLC must be in active status with the Secretary of State to be dissolved.
2. Filing a Certificate of Dissolution with the CA Secretary of State:
To dissolve a California Limited Liability Company, the California LLC must file a Certificate of Dissolution (Form LLC-3) and Certificate of Cancellation (Form LLC-4/7). However, if all the members vote to dissolve, only Form LLC-4/7 is required.
- Form LLC-3 and Form LLC-4/7: http://bpd.cdn.sos.ca.gov/llc/forms/llc-3_4-7_4-8.pdf
In lieu of the above-mentioned certificates, a domestic LLC can file a Short Form Certificate of Cancellation (Form LLC-4/8) if the following requirements are met:
- Form LLC-4/8 is being filed within twelve months from the date the Articles of Organization were filed with the Secretary of State
- The domestic LLC has no debts or other liabilities (other than tax liability)
- The known assets of the domestic LLC remaining after payment of, or adequately providing for, known debts and liabilities have been distributed to the persons entitled thereto or no known assets have been acquired
- The final tax return or a final annual tax return has been or will be filed with the Franchise Tax Board
- The domestic LLC has not conducted any business from the time of the filing of the Articles of Organization
- A majority of the managers or members, or if there are no managers or members, the person or a majority of the persons who signed the Articles of Organization, voted to dissolve the domestic LLC
- If the domestic LLC received payments for interests from investors, those payments have been returned to those investors
- Form LLC-4/8: http://bpd.cdn.sos.ca.gov/llc/forms/llc-3_4-7_4-8.pdf
3. Settle Financial Matters:
You can start the process for dissolution in California as long as you state as a part of your filing that a final tax return has been or will be filed with the California Franchise Tax Board. As a reminder, you must file an annual return for the year you go out of business. If you have employees, you must file the final employment tax returns, in addition to making final federal tax deposits of these taxes. For the tax year in which your business closes, make sure you indicate that this tax return is a final return.
The Secretary of State will accept your filing for dissolution, however before you can be formally dissolved, a tax clearance, consent to dissolution, or verification of good standing from the Franchise Tax Board is recommended, but not required. This document confirms to the Secretary of State that all taxes owed have been paid and all debts settled.
4. Cancel Licenses and Fictitious Business Names:
To protect your finances and reputation, ensure that all licenses and permits that are no longer needed are cancelled. Also, be sure to contact your insurance to cancel business liability and workman's compensation insurance, and notify your employee-based health care provider about the closure. Likewise, if you have registered under a fictitious business name, make sure to cancel that business name registration with the county recorders office.
5. Notify Creditors, Employees, and Customers:
Make sure to notify anyone else involved with the company of your impending closure. This includes employees, customers, suppliers, service providers, banks, lenders, and landlords.
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