Are you ready to stop doing business with your California corporation, but you’re not sure how the official dissolution process works?
The state of California requires corporations to file documentation of a dissolution, which can differ depending on a couple of key factors. What are these factors, and what does the dissolution process include? In this guide to dissolving a California corporation, we’ll break down all the relevant details.
If at any point you need help, you can use a service like Incfile or Northwest Registered Agent to handle the process for you.
Guru Tip: Most company formation services are also able to dissolve your entity for a small fee. They’ll take care of the paperwork so you can move on. Two popular options are LegalZoom and Incfile.
What Does It Mean to Dissolve a Corporation?
In any state, there is a series of steps that needs to be followed in order to properly dissolve a corporation. While this process does vary some from state to state, for the most part it’s necessary to follow this basic plan (unless your corporation has not yet issued shares or started doing business, which we’ll get to shortly):
- Hold a board of directors meeting and formally move to dissolve your corporation. The resolution to dissolve must be agreed upon by a majority of the corporation’s directors. Depending on your corporation’s structure, you may then need to take the vote to your shareholders. Either way, it’s important to take detailed records of this process for your corporate record.
- Fill out and file the Certificate of Dissolution, the Certificate of Election to Wind Up and Dissolve, or the Short Form Certificate of Dissolution.
- Fulfill all tax obligations with the state of California, as well as with the IRS.
- Cancel any relevant licenses and permits, along with closing your business bank account.
- Notify customers, vendors, and creditors of your dissolution.
Most of these steps are fairly self-explanatory, but where many corporation owners run into some confusion is when it comes to the Certificate of Dissolution. With that in mind, let’s dive into the details of this step.
How to Dissolve a California Corporation by the Board of Directors
Most corporations must be dissolved by the board of directors, and we discussed the necessity of holding a meeting to reach this resolution in the previous section.
In the state of California, you will need to file the Certificate of Dissolution with the Secretary of State. If all of the shareholders did not take part in the dissolution vote, you will also need to file the Certificate of Election to Wind Up and Dissolve. You can find both forms at this link.
The Certificate of Dissolution requires the following:
- Corporate name
- 7-Digit Secretary of State file number
- Dissolution vote outcome
- Affirmation of paid debts and liabilities
- Signature of the director(s)
The Certificate of Election to Wind Up and Dissolve requires most of the same information as the Certificate of Dissolution, however you will also need to provide more information about who is signing the document and what position they hold in the corporation.
There are no filing fees for the Certificate of Dissolution (or the Short Form Dissolution Certificate), however you will need to pay a $15 counter drop off fee if you choose to file in person. Otherwise, you can mail your form to the Secretary of State at the following address:
Secretary of State
Business Programs Division
Business Entities, 1500 11th Street
Sacramento, CA 95814
Under typical circumstances, you can expect the state of California to process your dissolution in about eight weeks. You can also pay a $350 fee for 24-hour expedited service.
How to Dissolve a California Corporation by the Incorporators
Sometimes, entrepreneurs need to dissolve their corporation before shares are issued or any business is transacted. In this situation, the incorporator will need to take responsibility for dissolving the corporation.
If your corporation was formed within 12 months of filing for dissolution, or you plan to file as incorporators, you can file the Short Form Dissolution Certificate rather than the standard Certificate of Dissolution. The short form requires the following information:
- Corporate name
- 7-Digit Secretary of State file number
- Affirmation that all dissolution requirements have been met
- Affirmation of dissolution process
- Signature
Just like the Certificate of Dissolution, the Short Form Dissolution Certificate does not have a processing fee, though you will need to pay $15 if you file in person. Otherwise, you can file by mail with the Secretary of State, and send the form to the same address:
Secretary of State
Business Programs Division
Business Entities, 1500 11th Street
Sacramento, CA 95814
Finally, the Short Form Dissolution Certificate takes about 8 weeks to process.
What Else Do I Need to Know About Dissolving a Corporation in California?
The moment the state of California dissolves your corporation, your business name becomes available for anyone who wants to use it. This is one of the reasons that you should never dissolve a corporation until you’re absolutely certain that you will no longer conduct business in this state.
There’s also the issue of administrative dissolutions to discuss. This is when the state dissolves your corporation without you requesting that they do so. This can happen if your corporation is found to be inactive, or you fail to file the necessary paperwork or pay taxes within 60 days of the due date.
it can be a real hassle to reinstate your corporation. A corporation can be suspended by the Secretary of State, the Franchise Tax Board, or both. If your corporation was dissolved by the Secretary of State, you simply need to file a current Statement of Information form. If it was dissolved by the FTB, you will need to pay all unpaid taxes, fees, or penalties, and file the Application for Certificate of Revivor. If you were dissolved by both, you will first need to file the Statement of Information and receive confirmation from the Secretary of State’s office, and then file the Application for Certificate of Revivor.
All told, the administrative dissolution and reinstatement process can be a burden for a corporation, and it’s best to avoid this situation altogether.
Conclusion
The process to dissolve a California corporation that has not distributed shares or transacted business is very simple, but if you have completed either of those steps, the paperwork is a little more involved.
Either way, it’s crucial that you complete each step discussed in this guide accurately, because you certainly don’t want to run into any issues with the dissolution process.
We hope this guide helped you answer any questions you might have had about dissolving a California corporation!