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Steps for Dissolving a Business in California

For some businesses, there comes a time when the people in charge voluntarily decide to close the business and cease operations. Closing a business can be an emotional process, but it is often a necessary step in the cycle of a company. California businesses can dissolve when they decide to stop doing business in the state, whether due to financial challenges, change of business direction, regulatory issues, partnership disputes, or any other reason.

In California, people must go through the formal process of dissolving a business to wind down a business’s operations. California law requires people to take several steps when shutting down a company. In this article, we discuss the general steps that must be taken to dissolve a business in California.

Steps to Take to Dissolve a Business in California

In California, there are several types of businesses that people can establish. Every business entity has its advantages, disadvantages, and legal and tax implications. The main types of businesses in California include sole proprietorships, partnerships, Limited Liability Companies (LLC), and corporations. In California, business dissolution requirements vary depending on the type of business. The following are some of the general steps that must be taken to dissolve a California business, regardless of the type of business;

Review the Corporate Contract

If you have a corporate contract, the first thing you should do is review it. Understand the provisions in the agreement related to dissolution. What does the contract say about when and how dissolution is allowed? For instance, suppose some partners do not support the decision to dissolve the company. What does the agreement say will happen in such a case? If you do not have a corporate contract, the Revised Uniform Partnership Act or California Corporation Code will govern the dissolution process based on the type of business.

Compliance Check

Before dissolving a business in California, you must ensure you settle all debts with creditors. You must also pay any remaining taxes or fees and file outstanding tax returns. The State of California Franchise Tax Board (FTB) requires California businesses to file all delinquent tax returns and pay all tax balances before dissolving the business. You also need to file a final tax return clearly stating on the form that it is a final return and stop conducting business in the state after the final taxable year.

Notify Stakeholders

All creditors, suppliers, employees, clients, vendors, and other interested parties must be notified about the decision to dissolve the business.

File Dissolution Forms

In order to dissolve a California business, you must file the appropriate dissolution forms with the California Secretary of State(SOS) within a year of filing the final tax return. The specific forms that need to be filed will depend on the type of business.

Other Steps

The following are other steps that should be taken when winding down a California business;

  • Closing credit cards and business checking accounts
  • Publishing a statement in a local newspaper that the company is no longer in business
  • Canceling permits, licenses, and fictitious business names
  • Distributing remaining assets
Contact a Business Attorney Serving Santa Clara and Silicon Valley

If you have decided to dissolve your company and need professional legal guidance, contact the skilled business attorneys at SAC Attorneys LLP.

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