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Steps for dissolving your California LLC

On Behalf of | Jan 2, 2021 | Firm News

If the time has come to close the doors of your California limited liability company, it is critical that you understand that shutting down is a process. It requires more than ceasing business operations. You must dissolve or cancel it while it is in active status. If the state has suspended your LLC, you must revive it before the dissolution.

According to the State of California Franchise Tax Board, terminating your company’s legal existence is a multi-step process. It has requirements involving the Tax Board and Secretary of State’s office.

Dissolving or canceling a business entity

Before you cancel your company, all tax balances must be up to date, including fees, penalties and interest. You will need to file the current year tax return with the Final Return box checked. Keep in mind that all tax returns are subject to audit until the statute of limitations expires. You must stop all business transactions after the last taxable year and file the appropriate paperwork within 12 months of your final tax return.

Avoiding penalties and fees

California has forms to record property distributions, fees, members’ share of income, and other data pertaining to the LLC. If you simply cease operations without filing the dissolution or cancelation paperwork, you must continue filing these forms. Without them, the state may penalize you with interest. The monthly penalty plus interest can result in a bill of nearly $1,000 at the end of 12 months.

Before you can consider your business closed, you must notify suppliers and other vendors, clear debts with creditors and notify customers. You can distribute any remaining assets among members of the LLC. Corporate documents may detail the process by which you can take this step. You can learn more about business dissolution and commercial litigation here.

 

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