How to Dissolve Inactive Corporations in California

By Ari Mushell, J.D.

How to Dissolve Inactive Corporations in California

By Ari Mushell, J.D.

You hatched a great business idea. You did research about the market, had discussions with others knowledgeable in the field, and decided to launch your business. To limit your liability, you incorporated the business through the California Secretary of State (SOS).

Businesswoman with long bob writing in notebook while on phone

Perhaps you have managed the business for several years and then decided, for a variety of reasons, that you no longer wanted to operate the business. Or perhaps you filed to incorporate your business but never actually operated it. Either way, your business is not dissolved in California until you complete the dissolution process. Until this is properly completed, the business, though inactive, is still liable to the state of California for franchise fees and taxes.

How to dissolve your business depends on a variety of factors, including when it was last active.

Dissolving a Previously Active Corporation That Distributed Shares

There are various steps to dissolving such a corporation:

1. Address all corporate governance issues.

Look to the corporation's articles of incorporation for the criteria to dissolve the corporation. You may need to convene a board meeting that votes on dissolution. Take minutes of the meeting to have a record.

2. Address all monetary matters.

Determine whether the corporation has paid all applicable taxes. If it is delinquent, pay that tax and other associated fees such as interest. Determine whether the corporation has any outstanding accounts payable and, if so, repay those debts.

3. File the appropriate dissolution form with the SOS.

On the SOS's website, find the appropriate form and download it to your computer. If you are winding down an S or C corporation, you will need to complete and file one or more of these forms:

If you are winding down an LLC, you will need to complete and file one or more of these forms:

  • Certificate of Dissolution (LLC–3)
  • Certificate of Cancellation (LLC–4/7)
  • Short Form Certificate of Cancellation (LLC–4/8)

4. File the relevant tax return with the Franchise Tax Board (FTB).

File the final current-year tax return with the FTB. On the application, check the “Final Return" box on the first page of the return and write "final" across the top. Refrain from conducting business in California through the corporation after the last day of the final taxable year.

Dissolving an Inactive Corporation Formed Within the Last 12 Months

Take these steps to dissolve such a corporation:

1. Address all corporate governance issues.

Look to the corporation's articles of incorporation for how to dissolve a corporation that has not transacted. You may need to convene a board meeting that votes on dissolving the corporation. Take minutes of the meeting to have a record.

2. Address all monetary matters.

While likely there will be few or no outstanding debts, you should verify as such.

3. File a Short Form Certificate of Dissolution with the SOS.

This is Form DSF STK, which can be found on the SOS website.

4. File the relevant tax return with the FTB.

This is a required step when terminating your corporation's legal existence.

Properly dissolving your company can allow you to move on with your future business endeavors with the reassurance that you've not left any loose ends.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.