How to Dissolve an LLC in California: 4 Steps

Voluntarily dissolving an LLC in California – taking steps so that it no longer exists – can be a great decision. Perhaps your small business can no longer compete in the market, or maybe you and your partners are no longer aligned on the business vision. Whatever the reason, it is your responsibility to take the necessary steps to dissolve your small business.

If you're considering dissolving your LLC or are ready to go, use this blog as your free step-by-step guide to determining, preparing, and ultimately dissolving your LLC in the state of California. 

Determine if California LLC dissolution is necessary

There are a number of reasons why you would cancel an LLC in California, but none will impact the actual winding down process. Common reasons to shut down an LLC in California include: 

• It's no longer economically viable 
• A planned expiration
• The primary purpose of the business is complete 
• Member disagreements and infighting 

Alternatives to dissolving your LLC in California include selling your stake in the company or buying out an LLC member who is no longer aligned with the business's strategic vision. In certain instances, the courts can get involved, which is called a "judicial dissolution." This type of costly intervention is usually viewed as a last resort to handling the dissolution process independently. 

Prepare to dissolve your California LLC

Many LLCs have a requirement to hold a member vote before the dissolution process may begin. The exact process your LLC must follow may be outlined in the articles of incorporation, so be sure you're familiar with and ready to adhere to the rules you and your partners agreed to follow.

If a majority of the members of your LLC vote to dissolve your business, then you can go through a series of steps to complete the process. 

Four steps to dissolve your California LLC

Once a vote to dissolve has concluded, you must begin the multistep process of winding down your business. Follow these steps and use the appropriate forms to dissolve your LLC in California. You can submit your paperwork in person or dissolve your LLC in California online.

Step 1: File certificate of dissolution

You must file a certificate of dissolution with the Secretary of State to dissolve your LLC in California. Pertinent information on the certificate includes: 

• LLC name 
• File number provided by the Secretary of State
• At least one authorized signature 
• Return mailing address

While there isn't a filing fee associated with submitting this certificate, you can pay for expedited processing. It usually takes weeks at minimum to fully process this certificate.

Also of note, if all LLC members vote to dissolve the business, you can skip filing this certificate altogether. Simply state that all members voted in unison to dissolve your LLC on the certificate of cancellation. 

Step 2: Give notice to creditors and Franchise Tax Board

You will need to draft and distribute a notice of the commencement of dissolution to all creditors, claimants, and anyone else whose address appears in your business records.

This notice allows them to collect unpaid debts and address outstanding issues before you permanently close your LLC in California. You must also submit the remaining LLC tax return to the Franchise Tax Board.

Step 3: Submit the certificate of cancellation

You must file a certificate of cancellation with the Secretary of State once your LLC is dissolved in California. Like the certificate of dissolution, you would include your LLC's name, the Secretary of State filing number, a return address, and at least one authorized signature. 

In addition to that information, a statement that your final tax return will be filed (or has been filed) with the Franchise Tax Board must be included.

Use the certificate of cancellation form to help dissolve your California LLC. 

Step 4: Address registrations from out of state

If your LLC conducts business in other states or has been cleared to do so, you also have a responsibility to take steps to terminate your LLC's ability to do business in those territories. The process to do this can differ from state to state and is sometimes called a certificate of termination or application of withdrawal, among other labels.

Until this step is completed, you will continue to be responsible for providing materials and fees to those states, including business taxes.   

How 1-800Accountant can help you

Staying compliant while dissolving your LLC in California can be overwhelming, which is why so many owners and entrepreneurs trust 1-800Accountant, America's leading virtual accounting firm for small businesses, for their dissolution needs. Our experts will guide you through the process, ensure certificates are correct and fully filled out, and provide guidance if you have been conducting business in other states. 

And if you intend on starting a new small business, as many owners and entrepreneurs often do, we have you covered with small business taxes, entity formation, California tax guidance, and our entire suite of professional accounting services. Schedule a quick consultation – usually 30 minutes or less – to learn how we can help your new California small business at a price that works within your budget.