Have you decided to stop transacting business with your California limited liability company? The state of California legally requires all business entities to go through a formal dissolution process.
What does this process entail, and how does it differ for domestic and foreign entities? In this guide, we’ll answer all the tough questions about dissolving an LLC in the state of California.
What Does It Mean to Dissolve an LLC?
Dissolving a company is an official means of permanently closing your business. While filing the dissolution documentation with the state of California is certainly an important part of the process, it’s not the only step. You should also liquidate your business assets, settle any liabilities, and send legal notifications to anyone that had an interest in your company.
Keep in mind that if you fail to complete these steps, you as a business owner could be held personally liable for any outstanding debts or liabilities of your limited liability company. Now that we’ve discussed what exactly dissolving an LLC is, let’s dive into the details of how this process is carried out in the state of California.
How to Dissolve a Domestic California LLC
If you wish to dissolve your LLC that is domestic to the state of California, there are three different forms you might need to file. If you formed your LLC less than one year ago, it has no debts or liabilities, its assets have been distributed, it is not conducting business, you’ve returned any payments from investors, and a majority of your owners voted to dissolve the LLC, you will file the Short Form Cancellation Certificate.
If your owners vote unanimously to dissolve the LLC but you do not meet every requirement of the Short Form Cancellation Certificate, you will need to file the Certificate of Cancellation. If the dissolution vote is not unanimous among your LLC members and you don’t meet the requirements for the Short Form Cancellation Certificate, you will also need to file both the Certificate of Cancellation and the Certificate of Dissolution. All of these forms can be filed with the Secretary of State.
You can complete the Short Form Cancellation Certificate with this information:
- Your LLC’s business name
- 12-digit California Entity Number
- Your printed name and signature
The Certificate of Cancellation requires the following information:
- LLC name
- 12-digit California Entity Number
- Nature of dissolution vote (unanimous or not unanimous)
- Signatures of the majority of LLC members
The Certificate of Dissolution requires the following information:
- LLC name
- 12-digit California Entity Number
- The reason for your LLC’s dissolution
- Signatures of LLC members/managers
None of the above forms require a filing fee. However, you will need to ensure that all existing fees and taxes have been paid, including the $800 annual tax, before dissolving your business. Once you have finished filling out the form(s), you can mail the paperwork to the Secretary of State’s office at this address:
Secretary of State
Business Entities Filings Unit
P.O. Box 944228
Sacramento, CA 94244-2280
California typically processes these filings within five business days. If you need your dissolution processed faster than that, you can hand-deliver your documents and pay a $15 fee to get priority service, although the state does not specify the turnaround times for priority service.
How to Dissolve a Foreign LLC in California
Do you need to dissolve a limited liability company based outside of California, but qualified to transact business within this state?
The dissolution process for foreign LLCs in California is virtually the same as the process for domestic LLCs. You will need to file a Certificate of Cancellation with the Secretary of State. However, there is no requirement to file a Certificate of Dissolution for foreign entities. The form will require the following information:
- LLC name
- 12-digit California Entity Number
- Signatures of the majority of LLC members
Just like domestic LLCs, foreign LLCs are required to pay any existing fees and taxes. However, there is no set filing fee to dissolve a foreign LLC in California. When you finish filling out the Certificate of Cancellation, you can mail the form to the same address:
Secretary of State
Business Entities Filings Unit
P.O. Box 944228
Sacramento, CA 94244-2280
What Else Do I Need to Know About LLC Dissolutions in California?
First off, it’s important to note that once your dissolution is complete, any business entity in California can claim your business name if they would like to use it. This is just one of many reasons that you should only dissolve your California limited liability company if you’re entirely certain that you’re done conducting business in this state.
You should also keep in mind that there are several scenarios that can lead to the state of California administratively dissolving your LLC. If an LLC ceases to conduct business in California but fails to dissolve, then it will accrue tax liability and penalties. So, the state of California will elect to dissolve businesses that have been suspended by the California Franchise Tax Board for at least 60 continuous months.
Additionally, the state of California can dissolve your business if you fail to pay your state taxes or file the required paperwork to conduct your business in a timely manner.
If your LLC is administratively dissolved, you will need to file a Statement of Information with the Secretary of State. You may also need to file an Application for Certificate of Revivor with the Franchise Tax Board.
Depending on the nature of your business, these steps could be just the tip of the iceberg for reinstatement, so it’s strongly advised to not dissolve your business unless you have no plans to transact business in California again.
Conclusion
Whether you’re dissolving a domestic or foreign limited liability company, the process isn’t complicated.
The filing of the Short Form Cancellation Certificate, the Certificate of Cancellation, or the Certificate of Dissolution is essentially the same process.
Our final note in this guide is that you should make certain each step of the process outlined in this guide is followed closely, to avoid any unforeseen snags with your dissolution. We hope this article helped you to better understand the dissolution process for a California LLC!