how to close an llc in california Do you want to know how to dissolve an LLC in California? If you have an LLC in California that you would like to dissolve, there are several steps that you will need to take. In this article, we will walk you through the process of dissolving an LLC in California.  We will cover the legal requirements to dissolve an LLC, what you need to do and what to expect.

How to Close an LLC in California: A Step-By-Step Guide

1. Compliance with the California Operating Agreement for Your LLC

The first step towards the dissolution of California LLC is to follow the operating agreement. If you have an operating agreement, make sure it provides the proper procedure to dissolve the LLC. If the LLC’s operating agreement does not provide the appropriate procedure, then there are certain points to be noted while dissolving the LLC.

2. Obtain Consent From the LLC Members or Owners

You’re required to have the approval of two-thirds of your LLC members or owners to dissolve the company. If you have a limited liability company (LLC), you’ll need the approval of a majority of its owners or members.  

3. Inform Staff and Customers of the Company’s Dissolution

Your business dissolution will also mean that employees and clients should be notified of the change. If you have an employee handbook, you can use that to inform your employees of the closing of the business. If you have a client list, you can send a letter to each client informing them of the closing. If you’re in a contractual relationship with a client, you can simply terminate the contract.

4. Notify Creditors of the Company’s Intention to Dissolve

When you’re closing your California business, it’s important to notify your creditors of the decision to close your business. If you’re operating the business as an LLC, you’ll need to provide notice to your creditors.

5. Cancel Your Company’s Licenses and Contracts

California law requires you to cancel all licenses, permits, and contracts for your business before filing your dissolution or cancellation form with the state. You should also notify the California Franchise Tax Board that your business will be closing. The Franchise Tax Board will tally up all of the taxes you owe and provide you with a notice on how to pay them.  

6. File Article of Dissolution

If your California Limited Liability Company has been operating for at least one year, you must file articles of dissolution with the California State Secretary of State. Two documents, a Certificate of Dissolution and a Certificate of Cancellation, must be filed with the California Secretary of State to officially dissolve the company. Because of this, the filing process is fairly simple. You simply need to fill out a form, return it to the Secretary of State, and pay a filing fee. Additionally, you must complete the dissolution, even if your LLC is inactive. However, if your LLC is inactive, you may be able to satisfy your dissolution obligations by filing an affidavit of dissolution instead of the article.   

7. Filing the Final California State Tax Return as well as the Federal Tax Return

After you file a Certificate of Cancellation or Dissolution with the California Secretary of State, you will also need to file a final California state tax return and federal tax return for the year of the business’s closure. The state can begin collecting taxes against the business at the end of the year. You will also need to file an Entity Termination Notice (ETN) in California. You can file a Certificate of Termination with the California Secretary of State after you file your federal and state tax returns. You can also file an ETN with the California Franchise Tax Board after you file your federal and state tax returns.

8. Distribute Any Leftover LLC Assets Among the Shareholders or Members

When the business is closed, you need to distribute any remaining assets to shareholders or members. If the business is a corporation, you’ll distribute the corporation’s assets to shareholders. If it’s a limited liability company, you’ll distribute the remaining ownership shares to members of the company. If you have other assets that you want to distribute to shareholders or members, you need to file a Final Account and Distribution of Remaining Assets to Shareholders or Members.

9. Registrations from the Other States

When dissolving your LLC, you must notify the SOS of the dissolution at least 30 days before the dissolution. If you dissolve your LLC out of state, you must also notify the Secretary of State for each state in which you have a registered office or a principal place of business. The Secretary of State in each state will send you a notice telling you how to dissolve your LLC in that state. For example, if you have a registered office in California, you must notify the Secretary of state for California. The LLC Act does not provide you with any rights to dissolve an LLC in another state without the consent of other LLC members other than those who are located in the other state.  For example, if one of your members is located in another state, you cannot dissolve your LLC in that state without the consent of that member. If you want to dissolve your in another state, ask your members to vote on the matter and get their consent.

10. Consult With Experts  

As an LLC owner, it is your responsibility to take care of the company’s finances. To ensure that you do not get into any legal or financial trouble, it is best to seek professional help. Since there are many reasons behind the dissolution of an LLC, there is a need for a professional who can provide the best recommendations and help. 

After Dissolving Your LLC, What Will Happen?

After filing an Article of Dissolution, it is the task of the Secretary of State to officially dissolve the LLC. There is usually a 2-month time period for the dissolution. During this period, the LLC is still valid. However, it is not considered active. 

Here’s How GoodBye Startup Can Make It Easier For You to Dissolve LLC in California

The procedure of dissolving a California LLC can be complex and time-consuming for you. If you don’t have somebody who can assist you with this procedure, you can get in touch with GoodBye Startup. The professionals at Goodbye Startup help business owners in dissolving their limited liability companies. You can develop a personalized dissolution plan with GoodBye Startup to guide you through the whole LLC dissolution procedure. Click here to know what business owners say about GoodBye Startup.

How To Dissolve An LLC In California: FAQs

Is tax clearance required to dissolve my California business?

California requires that all corporations and LLCs file a final California Franchise Tax return. If you don’t file a final California Franchise Tax return, your California business can be charged around a $500 penalty. You’ll also not be allowed to dissolve your business until you file your final California Franchise Tax return.

Is it possible to dissolve my present LLC or corporation?

Yes. You can dissolve a California corporation or LLC as long as you follow the necessary procedures.

How long does it take to dissolve a California LLC?

It may take the California Secretary of State’s office anywhere from three weeks to four weeks to complete your dissolution, although that time frame is very dependent on the volume of work they have at the time.

What is the difference between LLC dissolution and cancellation?

The LLC members will go through the dissolution process, also known as winding up, to cancel the LLC with the secretary of state and bring an end to the company’s existence.  The cancellation of an LLC by the secretary of state results in the immediate cessation of the LLC’s existence and all of its rights, privileges, and powers.

Who can dissolve an LLC in California?

You have the option to voluntarily dissolve your LLC. If your operating agreement specifies a minimum percentage of votes or a simple majority of all members, this must be approved. You may proceed with the dissolution if you get the required votes.
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