Dissolution of an LLC in California
The truth is that not all business ideas lead to success. Knowing when to "walk away" from an idea that is not leading to success is quite important. Of course, you cannot just "walk away" from a business. If you went through the formalities of forming an LLC in California, you must dissolve the company. However, before taking steps to dissolve your California LLC, you should know that once your business entity is dissolved, you cannot conduct any more business (apart from necessary wind-up measures). Also, if your California LLC is suspended, it cannot be dissolved. To proceed with dissolution, you must first activate it.
To dissolve your California LLC, first, you should go through the company's formational documents. You might find rules on how to dissolve the company in your company’s formational documents. Usually, formational documents will indicate that company members need to vote on whether or not they support dissolution. More specifically, the operating agreement or articles of the organization will indicate a requirement that a certain number of members vote in favor of the resolution to dissolve the company.
Also, whether or not your company's formational documents contain dissolution provisions, California allows an alternative method to dissolve an LLC voluntarily. You can dissolve a California LLC if most members or a greater percentage than stated in a formational document vote to dissolve the company.Certificate of Cancellation (Form LLC-4/7)
If all the members of the LLC vote to dissolve the company, this is the certificate you will file with the Secretary of State (SOS). Filing the Certificate of Cancellation by mail will cost you nothing. However, if you take the certificate in person, you will need to pay a $15 handling fee. Also, you will need to pay a fee if you want to receive fast services.Certificate of Dissolution
If some members vote against dissolving the company, you are required to file a Certificate of Dissolution with the Secretary of State. This certificate includes, among other things, your company’s name, SOS file number, an authorized signature, and a return mailing address.
You do not have to worry about a filing fee when filing this certificate. However, if you take the document to the Sacramento SOS office, there is a $15 non-refundable handling fee. Also, you will need to pay a fee if you want to receive fast services.Short Form Cancellation Certificate
This form, also known as Form LLC-4/8, is for those LLCs that have not conducted any business. If your LLC has not conducted any business since the date of organization and all the following statements are true, you can file Form LLC-4/8:
- The company was organized within the last year
- The company was formed in California
- The company is debt-free
- All company assets have been distributed, or the company never acquired any assets.
- Tax returns have been or will be filed.
- The company has returned all payments received from investors
- A majority of members or managers are in favor of dissolving the company
If you have decided to close your California LLC and need professional legal guidance, contact the experienced business attorneys at SAC Attorneys LLP.