How to Dissolve an LLC in California

By Jane Haskins, Esq.

How to Dissolve an LLC in California

By Jane Haskins, Esq.

To formally close a California LLC, you must file a certificate of cancellation with the California Secretary of State. You may also need to file a certificate of dissolution. The dissolution process also includes sending a notice to your LLC's creditors, winding up company business, and filing a final tax return.

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Here are the steps to follow.

1. Take a Formal Vote on Dissolving the LLC.

The owners, called “members," of the LLC should vote on whether to dissolve the company. Your LLC's operating agreement probably has a section that describes how the vote should happen and the percentage of members who must vote in favor of dissolution. If your operating agreement does not specify a procedure, California's LLC Act allows you to dissolve an LLC if 50 percent or more of the members vote in favor of doing so. Document the vote in a resolution or meeting minutes and note whether the vote was unanimous.

2. File a Certificate of Dissolution.

An LLC that has never conducted any business may qualify for a special procedure (see step 5). Otherwise, if the vote to dissolve the LLC was not unanimous, you must file a certificate of dissolution with the California Secretary of State, listing the LLC's name, Secretary of State filing number, and the event (such as a vote of the members) that led to the dissolution. If the vote was unanimous, you do not need to file the certificate.

3. Send a Notice to Your Creditors.

California law requires you to mail a notice to your business's creditors, informing them that you are dissolving the LLC and winding up its business. This gives the people you do business with a chance to submit bills, invoices, and claims and get paid before you close your business for good. You may want an attorney to help you prepare this notice to ensure it includes the proper wording.

4. Wind Up the Business.

After dissolution, an LLC continues to exist only so that its members or managers can wind up its business. The LLC cannot continue in business for any other purpose. Winding up includes resolving lawsuits, disposing of assets, and paying off debts. California's LLC Act provides that, unless the operating agreement says otherwise, the LLC should first pay debts to creditors (including LLC members that the LLC owes money to) before distributing the remaining money and other assets to the LLC's members.

5. File a Certificate of Cancellation.

To end your LLC's existence, you must file a certificate of cancellation after the winding-up process is complete. If the LLC was formed in the last 12 months and has never conducted any business, you may be able to file a Short Form Cancellation Certificate (Form LLC 4/8). Otherwise, you must file the Certificate of Cancellation (Form LLC 4/7). If your LLC was formed in another state but is registered to do business in California, you will file this same form to cancel your California business registration.

The certificate must be signed by the LLC's managers and include a statement that the LLC has filed or will file a final tax return with the California Franchise Tax Board. It should also indicate whether the dissolution was approved by all LLC members. Once the certificate of cancellation is filed, the LLC is cancelled and no longer has any powers, rights, or privileges.

6. File Final Tax Returns.

To avoid having to pay California's annual $800 minimum franchise tax in the future, you must:

  • File your final state tax return on time and check the box indicating it is a final return.
  • Not do any business in California after the last day of the year of your final tax return.
  • File dissolution documents with the Secretary of State within 12 months of filing your final tax return.

You can also file your final tax return before filing your certificate of cancellation.

Closing down a business is never easy. But following the proper procedure to dissolve an LLC ensures that you have tied up loose ends and satisfied outstanding debts so that you can move forward confidently with the next phase of your life.

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.