How to Dissolve an LLC in California

Dissolving a business often involves complex procedures. However, for a limited liability company in California, dissolving it takes a handful of paperwork. When an LLC is formed in California, the owner(s) draft the operating agreement. If the owner(s) decide to dissolve the business, the dissolution takes place following the articles mentioned in the operating agreement.

In this article, LLCBuddy editors shared the ins and outs of dissolving an LLC in California. LLCs must file the Articles of Dissolution with the California Secretary of State, just as the formation certificate was filed at the time of forming an LLC in California. It takes a few days to process and a handful of fees to be paid to the SOS. Many people hire a professional service to do the paperwork to process it hassle-free.

At the time of forming an LLC, an operating agreement draft must be written. Generally, the process of dissolution takes place following the operating agreement (read: California LLC operating agreement). Before the dissolution process, there are a few things to consider in the LLC.

First, make sure all the members of the LLC agree to dissolve the business. Once all the members are ready, their consent should be recorded via voting. After casting their vote in favor of the dissolution, the legal process must be started.

Dissolution of a California LLC requires three broad procedural steps. Having a California LLC Operating Agreement, closing all the tax accounts, and finally submitting the Articles of Dissolution form to the California Secretary of State.

Step 1: Follow the LLC Operating Agreement in California

When you have started an LLC as a business entity, then there is an operating agreement that is formed. There are complete details of how the company will function and grow in that operating agreement, which acts as a comprehensive guide. There is also a dissolution process, which is added to your agreement. The common dissolution steps that almost every LLC follows are:-

First of all, the dissolution vote will take place among the LLC members in the dissolution meeting. If the majority is with the YES, then the process goes into legal proceedings.

All the dissolution votes will be noted down and recorded with the minutes of the meeting or a consent form.
After that, a formal date for dissolving the LLC will be decided.
The next step is counting the LLC assets and dividing them among the stakeholders and members accordingly.
Finally, the creditors of the business are notified, and the debts of the business are settled.

This is a general process. However, it is strongly recommended to seek professional help to avoid any complications when it comes to terminating an LLC in California.

Get a Professional Agent Service

When it comes to a limited liability company dissolution, it is important to get professional help. A Registered Agent in California will guide you with everything you need to close your limited liability company. While choosing a registered agent, make sure they have a physical street address in the state. A professional service provider, like LegalZoom, helps you to file the Article of Dissolution and close your various tax accounts without any hassle. Below are the best LLC services in California that we strongly recommend for you.

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Step 2: Close All Tax Accounts

Every action that an official business takes is legally bound to some minimum business taxes. For that, various accounts, especially business entity tax accounts, are maintained by the state government with the help of various departments. You should consider all the taxes that you have paid for your LLC’s duration and make a list of them. Read more on California’s classification of LLC tax to learn more about how LLCs are taxed.

You must contact all government entities and clear the amount of outstanding taxes due by the date you have decided to dissolve. All the taxes must be paid in advance so that you don’t face any issues in the process of shutting down your LLC.

Some of the common taxes that limited liability companies have to pay are:

Unemployment insurance tax
Employee withholding tax if your LLC has employees.
If your LLC is engaged in selling taxable goods, then they are liable to pay the sales and use tax.

Most of these taxes are normally filed, but some departments require official paperwork, without which it is impossible for the business to close its accounts. Apart from business taxes, federal taxes, personal income taxes, and franchise taxes are to be considered. For the franchise taxes, a franchise tax form is required. That is why the LLC owner should go through the sales tax guide and hire an accounting service.

Tax clearance

While dissolving the California LLC, the owner is not required to obtain a tax clearance certificate. However, if you have filed federal taxes, then you must go through the final return option on your IRS form.

The IRS form for the LLCs that are classified as partnerships is Form 1065, and those LLCs that have registered themselves as corporations should check IRS Form 1120.

BOI Reporting

If you’re going to dissolve your LLC this year, make sure to update your BOI reporting. On January 1, 2024, the Financial Crimes Enforcement Network (FinCEN) imposed a rule on all businesses, including LLCs in California, to file the BOI Report. The Beneficial Ownership Information (BOI) in California is a report that states the in and out of the company. This report must be up-to-date and submitted to the FinCEN before you proceed with the dissolution.

Step 3: File Articles of Dissolution

There is a list of dissolution documents that you, as an LLC owner, have to file. Once these articles are filed, the legal existence of the LLC will be over. Like a California Articles of Organization, one has to file the California LLC Articles of Organization. The dissolution procedure and filing the articles of dissolution form are very easy and are discussed below.

First of all, the LLC owner(s) have to file the Article of Dissolution. There are multiple methods of filing available, such as filing by mail, in-person drop-off, or online filing.
You can follow the filing instructions on the official portal so that the steps for dissolution will be easier to complete.
For offline filing, LLCs must download the form and submit it to the California Secretary of State‘s physical office along with the state filing fee.
If you want to dissolve a California Foreign LLC, then look for the Foreign LLC Dissolution process.
You must fill in all the important and legal information in the form, so you should be extra careful.
After filling in all the important information, you must choose the mode of payment you want to use to pay the LLC dissolution filing fees.
After filling in every detail, one should submit the form through an official mail address and make a payment.

Filing	Forms and Details
Online Applications	Sign in to SOS
Offline Applications	Articles of Dissolution
SOS Contact (if offline application is available)	Secretary of State, Business Entities Filings, P.O. Box 944228, Sacramento, CA 94244
Filing Time	3-4 weeks
Filing Fee	$0 (The state does not have any dissolution fee)

The LLC you own is dissolved, and you are free from all the liabilities linked with the LLC and its taxes. A copy of both original articles and recorded articles should be submitted in front of the probate judge. Now it’s his call whether he accepts your expedited dissolutions or not.

Points to Be Noted When Dissolving an LLC in California

Apart from these three steps, no major dissolution rules exist in California. However, there are some other tasks one has to keep in mind while dissolving an LLC legally.

Winding Up

Some purposes of LLC require some attention even after dissolution, known as winding up. The task of winding up includes.

For a certain period, the property of a business requires preservation.
If there is any civil case against the LLC, then the owner needs to finish it.
Settle all the existing disputes of the LLC.
Transfer all the property of the LLC to the names of the partners.
Release all the liabilities that the LLC owes to others.
Rightful distribution of all the assets among members, according to their percentage of partnership.

Cost of Dissolving an LLC

LLC costs in California include the formation as well as dissolution fees. To dissolve an LLC in California, LLCs have to file an Article of Dissolution. The filing fee is $0 (The state does not have any dissolution fee). The details are mentioned in the articles of dissolution filing form. The following are the ways to pay for the dissolution,

You can select a payment pick-up option.
There is an option for direct account transfer through your prepaid accounts.
LLC owners can also use their Credit cards, providing their complete details and types. Along with that, an original signature is required to authorize the transaction that the state will make.

After Dissolving Your LLC

After you dissolve an LLC in California, you can reinstate or revive the same within a given time. In California, the LLC name will be available up to the time when the SOS dissolves the LLC completely. Immediately after the dissolution, the name will be available to others. After this, the name will be available to other LLCs. Besides, you might revive or reinstate the LLC in California if that is available. According to the California SOS, you can revive your LLC within 60 days. After that, it is not possible to reinstate the LLC.

Reasons Behind Dissolving an LLC in California

People always think they can leave the company without any notice, and there will be no issue. But if you have an LLC that you created with a legal obligation, it needs to be ended that way. Yes, if someone dissolves an LLC in California, they will have to do it while taking care of the government. For dissolving the company, there is always a reason. The reason can be voluntary or involuntary, too. Let’s get to know about the involuntary reasons,

If the company were caught doing illegal business.
If the company’s member died for any reason or went bankrupt.
The dissolution will be mandatory if the assets of the business are used unwisely.
If the time of the company’s dissolution was already determined in the will, then the company will go into dissolution at that time.

Top Businesses in California

With a population of 40,223,504, California is one of the favorable places to start an LLC. According to several reports, starting an LLC for Gasoline Stations can be profitable, as various places in the state have shown steady growth in this business over the past few years. On the other side, based on the city or region you’re going to start your LLC, you can decide the type of business to start. The following are the top 5 businesses you can start in California.

Gasoline Stations
E-commerce
Cosmetics and Beauty Services
Health and Fitness Center
Car Wash Business

California LLC Dissolution Review – A Quick Recap

Here’s a recap of the steps you must follow when dissolving your California LLC. Click on the steps in this list if you want to read the full details.

Follow Your California LLC Operating Agreement: Remember that when you started, you created an operating agreement. Use this agreement as a guide in proceeding with the dissolution of your LLC.
Close All Tax Accounts: Make sure you close all your tax accounts to avoid incurring further costs.
File Articles of Dissolution: File the articles of dissolution to make it known to the state where your LLC operates that you are indeed no longer in business.

FAQs

How do I dissolve an LLC in California?

To dissolve an LLC in California, you must file a Certificate of Dissolution with the California Secretary of State.

What is the fee for filing a Certificate of Dissolution in California?

The filing fee for a Certificate of Dissolution in California is $30.

Do I need to notify creditors before dissolving my LLC in California?

Yes, you must provide notice to creditors before dissolving your LLC in California.

How do I notify creditors before dissolving my LLC in California?

You must publish a notice of intent to dissolve your LLC in a newspaper of general circulation in the county where your LLC’s principal office is located.

Can I dissolve my LLC in California if it owes taxes or fees?

No, you must first pay or make arrangements to pay any taxes or fees owed by your LLC before dissolving it in California.

Can I dissolve my LLC in California if it has outstanding debts?

Yes, you can dissolve your LLC in California even if it has outstanding debts, but you must provide notice to creditors and follow the necessary procedures.

How long does it take to dissolve an LLC in California?

It typically takes 7-10 business days for the California Secretary of State to process a Certificate of Dissolution.

Can I expedite the dissolution process for my LLC in California?

Yes, you can expedite the dissolution process for an additional fee.

What happens to my LLC’s name once it’s dissolved in California?

Once your LLC is dissolved in California, its name becomes available for use by other businesses.

Do I need to file a final tax return for my LLC in California before dissolving it?

Yes, you are required to file a final tax return for your LLC in California before dissolving it.

Do I need to cancel my LLC’s business licenses and permits when dissolving it in California?

Yes, you should cancel any business licenses and permits associated with your LLC when dissolving it in California.

Can I revive a dissolved LLC in California?

Yes, you can revive a dissolved LLC in California by filing a Statement of Information and paying the necessary fees.

What happens if I don’t properly dissolve my LLC in California?

If you fail to properly dissolve your LLC in California, you may still be held liable for any business debts or obligations.

Can I transfer assets from my LLC to my personal name before dissolving it in California?

Yes, you can transfer assets from your LLC to your personal name before dissolving it in California, but you should consult with a tax professional to understand any tax implications.

Can I dissolve my LLC in California even if it is involved in legal proceedings?

Yes, you can dissolve your LLC in California even if it is involved in legal proceedings, but you must follow the necessary procedures.

Do I need to notify the Franchise Tax Board when dissolving my LLC in California?

Yes, you must notify the Franchise Tax Board of the dissolution of your LLC in California.

Can I dissolve my LLC in California if it has employees?

Yes, you can dissolve your LLC in California even if it has employees, but you must comply with state and federal employment laws.

Do I need to notify the California Employment Development Department when dissolving my LLC?

Yes, you must notify the California Employment Development Department when dissolving your LLC in California.

Can I dissolve my LLC in California if it is in the middle of a lease agreement?

Yes, you can dissolve your LLC in California even if it is in the middle of a lease agreement, but you should review the terms of the lease and seek legal advice if necessary.

Can I amend the Articles of Organization for my LLC before dissolving it in California?

Yes, you can amend the Articles of Organization for your LLC before dissolving it in California with the proper filings and fees.

Do I need to inform the California Department of Tax and Fee Administration when dissolving my LLC?

Yes, you must inform the California Department of Tax and Fee Administration of the dissolution of your LLC in California.

Can a dissolved LLC in California be reinstated?

Yes, a dissolved LLC in California can be reinstated by filing a Statement of Information and paying the necessary fees.

Can I dissolve my LLC in California if it is still making a profit?

Yes, you can dissolve your LLC in California even if it is still making a profit, but you should consult with a business attorney to ensure a smooth dissolution process.

Do I need to notify the California State Board of Equalization when dissolving my LLC?

Yes, you must notify the California State Board of Equalization when dissolving your LLC in California.

Can I bifurcate a dissolved LLC’s business operations in California?

Yes, you may bifurcate a dissolved LLC’s business operations in California into separate entities if desired.

Can I transfer the rights and obligations of my dissolved LLC to another entity in California?

Yes, you may transfer the rights and obligations of your dissolved LLC to another entity in California through a proper legal process.

Do I need to close out all bank accounts associated with my LLC before dissolving it in California?

Yes, you should close out all bank accounts associated with your LLC before dissolving it in California to avoid any potential liabilities.

Can I dissolve my LLC in California if it has outstanding lawsuits?

Yes, you can dissolve your LLC in California even if it has outstanding lawsuits, but you should consult with a legal professional to address any litigation matters.

Can I transfer my dissolved LLC’s intellectual property assets to another entity in California?

Yes, you can transfer your dissolved LLC’s intellectual property assets to another entity in California through appropriate legal channels.

What is the fee for dissolving an LLC in California?

The fee to file a Certificate of Dissolution for an LLC in California is $20.

In Conclusion

Dissolving a business is not an easy task, as a lot of homework is involved in the process. The official process might have only a few steps; however, before and after dissolving the LLC, there might be a lot of other tasks. In this case, it is highly recommended to get a professional service. If you are looking to file an LLC at $0, then LegalZoom is your answer.

Limited liability companies reduce owners’ personal liability. Having an LLC is quite cost-effective. However, if it is required to close down the business, then the dissolution process should be done legally. This article shared the general steps. Let us know if you have any queries.