Step 1: Follow Your California LLC Operating Agreement
For most LLCs, the steps for dissolution will be outlined in the operating agreement. Some common dissolution steps include:
- Holding a vote with LLC members to dissolve the LLC
- Recording the dissolution vote in the LLC’s meeting minutes
- Determining the formal date of dissolution
- Distribution of LLC assets
- Notifying creditors and settling any business debts
If your LLC does not have any set dissolution procedures in its operating agreement, you should consult the state for further instruction.
Step 2: Close Your Business Tax Accounts
Every active California LLC has various tax accounts that are maintained by different departments within the California State government. Before you can dissolve your LLC, you must first pay off all taxes and/or fines owed to these accounts.
Here are some of the common taxes your LLC may owe:
- Franchise Tax
- If you have or have had employees in California:
- Unemployment Insurance Tax
- Employee Withholding Tax
- Disability Tax
- If your LLC sells or has sold taxable goods or services in California:
- Sales & Use Tax
Closing your tax accounts usually involves simply filing a final return to the appropriate agency. However, some accounts require submitting other official paperwork. If you need assistance in closing your tax accounts, it may be helpful to hire a Certified Public Accountant.
LLCs with a revenue of $250,000 or more must pay their LLC fee to the Franchise Tax Board before dissolving.
NOTE: None of your LLC's tax accounts can be closed if they have a remaining balance. All taxes, penalties, fees, and interest must be paid in full before you can dissolve your LLC.
Step 3: File Articles of Dissolution
California provides three different dissolution forms for LLCs.
If your LLC meets all of the following criteria, you can file the Short Form Cancellation Certificate:
- Your LLC was formed in the past 12 months
- Your LLC has no debts or outstanding payments
- Your LLC has submitted its final return
- Your LLC has distributed assets
- The majority (>50%) of voting parties vote in favor of cancellation
If you cannot answer yes to those criteria and all voting parties vote in favor of cancellation, file the Certificate of Cancellation.
If you cannot answer yes to those criteria and less than all voting parties vote in favor of cancellation, you must file a Certificate of Dissolution along with a Certificate of Cancellation
California requires business owners to submit their Articles of Dissolution by mail, in person, or online.
You can also have a professional service provider file your Articles of Dissolution for you. Incfile prepares the Articles of Dissolution for you, and files them to the state for $149 + State Fees.