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How To Close An LLC In California? Steps By Steps
Reviewed by Kristina Knight, Journalist , BA
The article is checked by our editorial team, Which includes entrepreneurs who are painfully aware of how overwhelming and challenging it is to start a business for the first time.
If you’re ready to dissolve your California LLC, it’s important to do so in the correct manner. Otherwise, your LLC members could face fines from the California Franchise Tax Board and California Secretary of State.
That’s why we’ve created this guide. It provides step-by-step instructions for closing a California limited liability company without incurring fines during the LLC dissolution process from the California Secretary of State. Keep reading to learn more.
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Can Small Business Owners Close An LLC?
Yes, as a small business owner, you have the right to dissolve a California LLC by submitting voluntary dissolution paperwork.
However, the proper dissolution form will vary based on how many LLC members you have, whether you have their approval, and how recently you formed your business entity and submitted your LLC’s operating agreement to the state.
We cover each possible path you can follow to complete your LLC dissolution in the next section, so keep reading for the specifics of how to dissolve a California limited liability company.
How To Dissolve An LLC In California?
The process for dissolving a California LLC is as simple as submitting a form online. But the specific forms you need to submit will vary based on the nature of your California LLC dissolution and some other factors.
We provide the following step-by-step instructions to make this process easier.
Consider whether you owe a payment to the franchise tax board
The first thing you should consider is when your next payment to the franchise tax board will be. This will impact how fast you need to be about submitting your paperwork.
California mandates that every California LLC pays a minimum of $800 to the tax board annually. If your payment is coming up, you should try to dissolve the business as quickly as possible to avoid that payment.
You can find more information about this on the franchise tax board’s website, but it’s definitely something to keep in mind as you determine when to file your final franchise tax return and pursue a certificate of cancellation for your business.
Determine whether you created your California LLC within the last 12 months
Next, determine whether you submitted an operating agreement for your business entity within the last 12 months. If you did, you may be able to file a short form certificate to receive a certificate of cancellation from the state faster.
Determine whether you have the unanimous consent of all LLC members
If your LLC has existed for more than 12 months, then the next step is to determine whether all the members of the LLC want to dissolve it or if some still want to conduct business with the LLC’s assets.
If everyone wants to dissolve a California LLC, you can file for a certificate of cancellation by filling out the cancellation form online and submitting it to the Secretary of State. If some voting interests aren’t interested in pursuing a certificate of dissolution, then you need to look closely at your operating agreement.
Your LLC operating agreement should define what you need to achieve at a dissolution meeting in order to cancel licenses and obtain a certificate of dissolution. This may mean getting a majority vote or having a greater percentage than that, depending on your operating agreement filing.
Sign and submit the correct forms on the state website
All that’s left to do is fill out cancellation form LLC 4 or whatever other form you’ve decided you need on the state’s website and submit it to the Secretary of State.
These forms are very straightforward. You should have no problem filling out the cancellation form LLC 4 or any other form to complete the dissolution process and keep your organization in good standing.
Take care of debts and other liabilities
Whether you’re able to file a short form certificate or you need to apply for a certificate of cancellation, you have to wind down your LLC’s business before finalizing the dissolution. This will typically mean things like:
- Filing your final tax return (and final annual tax return)
- Paying off any taxes owed, legal fees, and other debts incurred while you conducted business
- Splitting any remaining assets with LLC members based on your operating agreement and rules set by the Secretary of State
- Notify creditors of your certificate of dissolution
- Removing active status from your business in California on any relevant sites and forms
How Long Does It Take To Dissolve An LLC?
If you want to voluntarily dissolve your business, then you can complete all of the filings to do so on the same day that your organization makes the decision to completely close its doors. However, the filing will likely take 3-4 weeks to process unless you pay for expedited service (which may not always be an option).
At the end of this process, and once you file your final tax return, you’ll get a certificate of cancellation or certificate of dissolution that discharge obligations disposing of any fictitious business names as long as you pay your filing fees.
What Might Occur If Your LLC Isn’t Properly Closed?
If your LLC isn’t properly closed, you could be sued by other members who want the organization to remain in business. This is why it’s important to follow all of the procedures for LLC filing and dissolution that are outlined in your articles of organization.
In addition to reviewing your articles of organization, you also need to ensure you complete your tax returns and file your final return for this business name. Completing this type of filing will help you get your certificate of cancellation forms completed correctly, regardless of how members vote.
Who To Notify After Closing Your LLC?
You should notify anyone that your LLC is currently engaged in business with before filing your final tax return and completing your last certificate of cancellation form. Before you pay the filing fee for these, make sure that you alert any debtors or suppliers that you will no longer be in business. You should ideally do this as closely to when members vote as possible.
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Final Thoughts
Shutting down an LLC in California is as easy as completing the right certificate of cancellation form. You can shut down your LLC and its business name on the same day you make the decision to end the company.
However, timing matters, and you may have to follow procedures outlined in your articles of organization to remain in good standing with the state. It’s also important to get tax clearance by removing any remaining tax liability before making this decision.
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Frequently Asked Questions (FAQs)
You can close your LLC in California by filing for a certificate of dissolution with the state. This is as simple as finding the right form, filling it out online, and submitting it to the state, just as you did with your articles of organization.
It can take 3-4 weeks of processing time for the company to officially dissolve. However, paying extra for things like same-day processing and expedited service may help this go faster for you.
No, not necessarily. Your requirements for dissolution should be laid out in your LLC’s operating agreement. These often allow for a majority vote to determine whether dissolution will proceed.
There are no required fees for dissolving an LLC in California. However, you can pay fees for expedited service.
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Bizreport Advisor adheres to strict editorial integrity standards avoids using tertiary references. We have strict sourcing guidelines and rely on peer-reviewed studies, academic research. To ensure the accuracy of articles in Bizreport, you can read more about the editorial process here.
- Franchise Tax Board Homepage | FTB.ca.gov. Ca.gov. Published 2021. Accessed April 26, 2023. https://www.ftb.ca.gov/
- California Secretary of State. Ca.gov. Published 2019. Accessed April 26, 2023. https://www.sos.ca.gov/
- How to close a California business entity | FTB.ca.gov. Ca.gov. Published 2018. Accessed April 26, 2023. https://www.ftb.ca.gov/about-ftb/newsroom/tax-news/may-2018/how-to-close-a-california-business-entity.html
- Limited liability company | FTB.ca.gov. Ca.gov. Published 2019. Accessed April 26, 2023. https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html
- Limited Liability Company Operating Agreement. www.sec.gov. Accessed April 26, 2023. https://www.sec.gov/Archives/edgar/data/1345691/000119312512119426/d230618dex1012.htm