Dissolving your LLC requires several paperwork filings and legal procedures that may cause issues if not accomplished correctly. In this post, our team of experts will provide guidance while answering a few of your questions on how to dissolve an LLC in California so that you can avoid penalties and additional fees during the process.
How to Dissolve an LLC in California
Review Articles of Organization and LLC Operating Agreement
As an LLC business entity formed in the state of California, your company is bound by the provisions written in your operating agreement and articles of organization.
These business documents have specific instructions that corporation members must comply with to dissolve a California LLC, including the date and time arrangement of the board meeting and required vote percentage.
Vote on the LLC Dissolution
The next step in the dissolution process is scheduling a board meeting with all the LLC members to vote to dissolve the corporation’s existence or raise a question to reject the motion.
Even if there’s no vote percentage in the provision of your LLC documents, the state will recognize the decision if the majority of the members will vote in favor of the suggested business closure.
Notify Creditors on LLC Dissolution
As a California LLC, you’ll need to notify all the claimants and creditors of your business regarding the retraction of your operations. You may mail them all the information on how and until when they can file their claims. And because this is a legally complex procedure, our team recommends seeking assistance from professional attorneys to avoid further disputes.
Submit Certificate of Dissolution
If the majority of LLC members voted to dissolve the LLC, you’re free to file a Certificate of Cancellation to the California Secretary of State. However, if votings didn’t reach the desired percentage, a Certificate of Dissolution must be filed. The dissolution forms must include the business file number with the return mailing address and authorized signature.
Once the secretary of state approves the cancellation certificate and the dissolution certificate, your LLC trade name will be made available to the public, and other business entities may apply for it.
Winding Up the Business
As a business in California undergoing dissolution, your LLC must go through the winding up procedure under the jurisdiction of California’s LLC Act. Through a consent form, members can appoint an individual to handle this business affair to fulfill the remainder of the state requirements.
Settle Debt and Other Liabilities
Another crucial step for a limited liability company facing voluntary dissolution is to settle all known debts. Filing for closure also means your LLC needs to pay all outstanding taxes owed to the state. Take note that this is one of the steps you must not overlook when learning how to dissolve an LLC in California.
Allocate LLC Assets
When it comes to distributing remaining assets, our team advises LLC members to check the ownership provision indicated in the business operating agreement in the presence of attorneys. Through these conditions, all your LLC profits, losses, and assets will be fairly divided to each member .
File Certificate of Cancellation and Tax Return
Last but not least, you’ll need to file a Certificate of Cancellation to dissolve your California LLC and attach statements confirming submission of final tax return forms to the Franchise Tax Board. Along with this form, you must also provide your LLC trade name and filing number.
Although you wouldn’t need tax clearance, the state secretary still requires any business under its jurisdiction to file a final tax return to the California Franchise Tax Board.
Before filing, don’t forget to sign the statements for taxes and check the names of those who voted in favor of the dissolution. You may download the Certificate of Cancellation form through the state secretary’s website.
There are several forms available online, so our advice is not to confuse Form LLC-4/7 with the short form cancellation certificate (LLC-4/8) unless it’s for a non-profit LLC.
Duration and Cost of LLC Dissolution
Although there’s no filing fee when you submit your LLC cancellation documents to the California secretary of state, you can expedite the process by paying additional fees. If you opt to do that, you can expect the accomplishment of your filings within the same day or 24-hour interval, depending on which you paid for.
How much does it cost to dissolve an LLC in California?
Dissolving an LLC in California doesn’t cost anything except when you opt for expedited processing with a minimal special handling fee of $15. Besides that, you can also select their 24-hour processing service for $350 and their same-day option for a $750 additional fee. Additional costs may incur if you decide to dissolve your corporation through a registered agent service.
From reviewing your LLC documents up to settling your franchise tax return, learning how to dissolve an LLC in California involves meticulous procedures. Complying may appear complex and overwhelming, but fulfilling these requirements will pose advantages should you decide to form another business in the future.