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How To Dissolve An LLC In California

California LLC Dissolution: What You Need To Know

If you’ve made the decision to close your California limited liability company (LLC), it’s important to follow the proper steps to dissolve it legally. By doing so, you can protect yourself from any future personal liability for LLC taxes, penalties, or interest.

There are various reasons why a company may choose to cease its operations. Perhaps the initial brilliant idea turned out to be impractical in reality. Maybe conflicts among the owners arose during the actual management of the company, making it impossible to reconcile. It’s also possible that the business simply wasn’t profitable, or that the global pandemic dealt a devastating blow. Regardless of the reason, closing a business in a legally compliant manner requires taking certain necessary steps – you can’t simply abandon it. Luckily, at EJP Law, P.C., we have successfully helped countless clients through this very situation and are ready to do the same for you.

Annual Minimum Franchise Tax Affects Your Timing

Why is it crucial to diligently complete all the necessary steps for the proper dissolution of your LLC in California? Under California law, all LLCs are required to pay an annual minimum franchise tax of $800, regardless of their business activity. This means that the payment must be made even if the LLC is not generating any revenue.

Furthermore, there are additional annual maintenance requirements that the LLC must fulfill, including submitting an annual information return and filing a tax return with the Franchise Tax Board of California.

If your LLC is experiencing financial difficulties and you have made the decision to cut your losses and dissolve it, it is advisable to take prompt action and ensure that the LLC is properly dissolved before the due date for the annual minimum franchise tax and filings.

As per the Franchise Tax Board, in order to avoid the obligation of paying the annual minimum franchise tax for the current or subsequent years, your LLC must:

  • File its final franchise or annual tax return for the preceding taxable year in a timely manner
  • Cease doing business in California after the last day of the preceding taxable year
  • File the necessary documents to cancel the LLC within twelve months of filing the LLC’s final tax return

California Dissolution and Cancellation Forms

No filing fees are required for the following documents. These forms cannot be filed online; they must be mailed to the Secretary of State.

Short Form Cancellation Certificate

To dissolve your California LLC, you may submit the Short Form Cancellation Certificate (Form LLC-4/8) if ALL of the following statements hold true:

  • LLC was organized within the last 12 months
  • LLC was formed in California
  • LLC has no debts or other liabilities other than state tax requirements
  • All final California tax returns have been or will be filed
  • All LLC assets have been distributed or the LLC never acquired any assets
  • No business has been conducted since the date of the organization
  • A majority of managers or members have voted to dissolve
  • All payments received from investors have been returned

You are ineligible for filing the Short Form Cancellation Certificate if any of these statements are false.

Certificate of Cancellation

You can submit the Certificate of Cancellation (Form LLC-4/7) if you responded “UNTRUE” to any of the statements mentioned above and ALL members of your LLC voted in favor of dissolution. If the vote for dissolution was not unanimous among your LLC members, then you are not eligible to file a Certificate of Cancellation.

Certificate of Dissolution

To dissolve a California LLC, you can also file a Certificate of Dissolution. You can file a Certificate of Dissolution if you answered UNTRUE to any of the statements listed above and less than all of your LLC members voted for dissolution.

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Risks of Failing to Properly Dissolve and Wind Up a California LLC

Neglecting to dissolve and wind up an LLC in a proper manner can result in substantial legal, financial, and reputational repercussions. Let’s explore the potential risks that LLC members may encounter if they fail to fulfill their obligations:

  1. Legal Liabilities: If an LLC in California is not properly dissolved, the members could potentially be personally liable for the company’s outstanding debts and legal obligations. This risk is particularly significant if the LLC fails to notify creditors of the dissolution or mishandles creditor claims. Furthermore, members may face lawsuits from creditors, suppliers, customers, or employees. It is crucial to ensure the proper California LLC dissolution to mitigate these potential consequences.
  2. Tax Penalties and Consequences: Failure to file final tax returns or obtain tax clearance from the California Franchise Tax Board could result in fines, penalties, and interest charges for LLC members. Additionally, the LLC may remain responsible for ongoing taxes and fees, including California’s annual minimum franchise tax, until the dissolution process is properly finalized.
  3. Reputation Damage: Failure to properly wind down an LLC can have detrimental effects on both the business and its members’ reputation. This can hinder members’ ability to secure financing, forge new business relationships, and capitalize on future opportunities. It is crucial to ensure a smooth and effective closure to safeguard the interests of all involved parties.
  4. Ongoing Obligations: An LLC maintains certain responsibilities until it is formally dissolved. These include fulfilling annual report filings, making franchise tax payments, and renewing business licenses. Neglecting these obligations may lead to additional penalties.

Frequently Asked Questions

What Form Do I File To Cancel My California LLC?

The form you need to submit for dissolving your California LLC depends on the voting outcome of your members. If the decision to cancel the LLC was unanimous, you will file the Certificate of Cancellation (Form LLC 4/7). If the decision was not unanimous, you will file the Certificate of Dissolution (Form LLC-3).

For a California LLC that is less than one year old, has not conducted any business since registering, has no debts, and meets certain requirements, there is an option to file the Short Form Cancellation Certificate (Form LLC 4/8). You can find the California LLC dissolution forms on the Secretary of State’s website.

How Much Does It Cost To Dissolve A California LLC?

Filing the California LLC dissolution forms is free of charge. However, if you wish to expedite the process, you have the option to pay for expedited service and preclearance. Preclearance allows you to personally submit your documents for a review before filing, ensuring that you have not made any errors that could result in your filing being rejected. This additional step helps to streamline the process and minimize the chances of any potential mistakes.

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10-Day Preclearance


5-Day Preclearance


72-Hour Preclearance


24-Hour Preclearance


How Long Does It Take To Dissolve A California LLC?

The processing times of the California Secretary of State may vary depending on workload and demand. However, based on their current pace, it is estimated that it will take approximately 3 to 4 weeks for their office to complete the necessary steps to process the dissolution. Rest assured that they are actively working to ensure thorough and efficient handling of your request.

Wondering How To Dissolve An LLC In California? We Can Help

Dissolving an LLC in California can be a multifaceted process. Seeking the guidance of a knowledgeable Los Angeles business lawyer is crucial to ensure adherence to laws and regulations, mitigate potential legal risks, and facilitate the drafting and review of necessary dissolution documentation. In addition, legal counsel can provide assistance with contract termination or modification, mediate disputes between members, and facilitate negotiation and resolution. If you’re looking to dissolve an LLC in California, contact the Law Offices of Eric J. Proos, PC to learn more about how we can help.