How to Dissolve Corporation in California (2022)

Author

Max

What Does a Corporation Dissolution Mean?

Dissolution of a corporation is the term used to describe the process of ending a corporate entity. A corporation’s dissolution is more complicated when there are more owners and assets. The first stage in dissolving any corporation is obtaining the required internal corporate permission for the dissolution.

Criteria for a Corporation’s Dissolution

You must pay government taxes and creditor payments before you may terminate a business. Hence, you are not permitted to owe money to creditors or pay taxes.

All of the financial statements must be divided among the shareholders before the company is liquidated.
Regardless of the method, the company’s dissolution must be published in the Mercantile Registry’s Official Gazette.

You can avail of the services of Goodbye Startup to ensure that the entire process of dissolving a corporation is carried out appropriately, particularly if there is any particularity. Get in touch with experts at Goodbye Startup, and they will handle your case quickly and professionally to dissolve your corporation in California while meeting all legal requirements.

How to Dissolve Corporation in California: Corporation Dissolution Process

A business owner must submit the request for incorporation to the California Secretary of State when forming a corporation for the first time. Similar to this, you also need to file a certificate of dissolution with the Secretary of State to close or dissolve the corporation. Let’s go over how to dissolve corporation in California.

1. Decision Making by the Board

Holding a Board of Directors meeting should be the first step taken by a business owner in California who decides to shut down operations and dissolve the organization. A move to dissolve the corporation will be made at this formal meeting by the corporation members. The participants in the meeting will cast a formal vote. The proceedings of the meeting should be recorded in the corporate minutes by a participant. In order for a corporation to be dissolved, a majority of the company’s shareholders must approve the move, even if the Board of Directors has already agreed to the dissolution. Before the owner files with the Secretary of State, the shareholders must sign a formal written agreement approving the dissolution.

2. Dissolution Certificate

You don’t need to meet the Secretary of State in person and speak to them face to face! Documents can be filled out on the Secretary of State’s website to get a certificate of dissolution. Dissolving a company begins with the filing of a “certificate of dissolution” with the Secretary of State.

3. Standard Form Dissolution Certificate

If the company is eligible to incorporate as a California domestic stock corporation, the owner may just have to submit the short form certificate. Form DSF STK is the name of this document. The corporation must adhere to the following requirements for this exception to be valid:

It is submitted within a year of the date the Secretary of State received the articles of incorporation.
Despite the fact that it hasn’t done any business for a considerable time, the corporation has to file or plan to file its last tax return with the Franchise Tax Board.
Other than taxes, Corporation has no debts or liabilities.
The corporation ensures that any tax liability will either be satisfied on a basis of taxes paid or that the obligations will be assumed.
The corporation has been agreed to dissolve by both the incorporator and the majority of the board of directors.
All assets have been distributed to their rightful owners unless nothing has been obtained.

Only corporations based in California need to fill out the aforementioned documents. They do not apply to California LLCs or nonprofit organizations since those entities must be dissolved using different paperwork.

4. Inform the state and Federal Tax Authorities

Once the necessary documentation has been completed with the state of California, the corporation’s dissolution must be reported to both the IRS and the California Franchise Tax Board. In the past, this procedure involved submitting final tax returns to get a tax clearing certificate, which was ultimately delivered to the Secretary of State. However, California’s AB 2341 statute eliminated the need for a tax clearance certificate in 2006. Nevertheless, a dissolved California corporation is still required to submit a final tax return and settle any debts. In accordance with Section 23151 of the California Code of Regulations, a company remains liable for any outstanding tax returns or obligations even after its dissolution.

5. Terminate Licenses, Credit Lines, and Accounts

Like closing any firm, closing a corporation means tying up any loose ends and terminating all operations. All business-related financial accounts and lines of credit must be closed. Additionally, timely termination of special licenses and permits is required. Of course, all clients and vendors must be properly informed of the company’s closure and dissolution.

Here’s How GoodBye Startup Can Make It Easier For You to Dissolve Corporation in California and Avoid Legal Issues

The corporation dissolution procedure in California can be time-consuming, expensive, and fraught with difficulty. It is highly recommended that you use a professional service if you want to dissolve a California corporation. Experts at Goodbye Startup can help you to properly dissolve your Corporation in California and avoid legal issues. They will protect your best interests while saving you time and money. They will also ensure that you are not burdened by the legal procedures that must be completed to dissolve corporation in California. To Schedule a Free Consultation Call With the Experts at Goodbye Startup, Click Here.

Causes of a corporation’s dissolution

You will need to have your company dissolved if you are going to formally close it. Particularly when there are partners, this is true. To dissolve the partnership and put an end to the business, all of the partners will need to cooperate. There can several reasons for dissolving a corporation.

Low Availability of Funds

Many corporations are forced to shut down since they lack the necessary cash flow to survive. We should congratulate these business owners on their intelligence. They won’t go into debt only to keep their company running.

Inappropriate Management (or Accounting)

Being a partner in a business requires a lot of labor. Unfortunately, not everyone will enjoy it. Poor decisions can easily bring a corporation to its knees (both in terms of the company strategy and finances).

Massive opposition

Even in business, competition may be beneficial. It encourages you to put forth more effort and improve (or even make better products). Sometimes, the level of competitiveness may intense. This may require you to underprice your goods and services, which could reduce the profit.

Financial system

Sadly, businesses are impacted by the state of the economy. When the economy is doing well, there is enough circulation of cash. People will cut back on certain unneeded (and occasionally vital) products while the economy is hurting.

Liability for Manufacturers

You might be forced into dissolution if you are manufacturing a faulty product (either knowingly or unknowingly). If you simply shut it down, you might have to deal with several liability claims that could drag on for years. As a result, if your company is dissolved, you won’t be held accountable.

Insolvency

To get out of debt, though, you first need to petition for your company’s dissolution. Without doing so first, you are unable to file for bankruptcy. A company occasionally has no choice except to make payments.

Partnership Disagreements

There may usually be conflicts when there are partners. They occasionally are unable to find solutions to their issues to keep the business surviving.

Conclusion

If you want to dissolve a California corporation, you’ll need to follow a specific process. In this guide, we have walked you through the steps you need to take and provide some resources to help you along the way. Dissolving a corporation can be a complicated process, but it’s necessary in order to terminate the company’s existence. You can save time, money, and energy by getting help from experts at Goodbye Startup. They have done the legal work and know exactly what to do to dissolve your corporation in California and avoid legal complications.

Have a question?

Write to us to get a free consultation with our experts.

Speak to a expert