Whether you have owned and operated your California LLC for years or just formed it yesterday, if you want dissolve your LLC’s charter with the state of California you'll have a few options to consider.
I will attempt to give you an overview of all your choices so that you can make the best decision when it comes to determining how to end the existence of your California LLC. I'll also give you some considerations about state taxes and some other considerations outside of the state of California.
When dissolving (in California it’s called “Cancellation”) an LLC, you are literally putting an end to its existence. Remember your LLC is considered by law to be a legal person, so likewise you must plan what to do next: luckily a funeral is not required in this case.
Just as a new LLC is created by filing articles of organization, dissolving/cancelling a California Limited Liability Company requires the filing of Certificate of Cancellation. But I’m getting ahead of myself, first you must decide if you want to voluntarily or involuntarily terminate your LLC.
This is a simple way of saying “formal cancellation”. In other words, you are pro-actively deciding to terminate your LLC now rather than waiting for the state to do this involuntarily. To do this, you must file certificate of cancellation with the Secretary of State of California, the same agency that formed your LLC. You can find this form here.
The state does not charge for this filing and it is completed within a few days to a few weeks (depending on the time of year this filed).
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If your California limited liability company does not file its statement of information or its franchise tax return (see here for your LLC’s annual filing requirements), the state will eventually involuntarily terminate the charter. This method has also been referred to as “abandonment”, since you would be abandoning the charter and letting the state terminate on its own terms.
If the LLC did not conduct any business (no income, expenses, etc.) this may be a viable option. However, if there are assets and income/expense activity, it may be better to formally cancel the LLC.
Regardless of whether you go the voluntary or involuntary route, I would recommend that you consult your tax advisor. Last thing you want to do after you buried your LLC, is to have it come back to life or find some other skeleton in the LLC’s closet that wasn’t dealt with after the LLC was terminated.
California Franchise Tax Board charges taxes of at least $800 per year whether the LLC has existed 1 day or 365 days. So, it is likely better to make sure that you cancel your LLC before the start of a new calendar year to avoid minimum taxation for a whole year.
Once a Certificate of Cancellation has been filed with the Secretary of State, you will still be required to file a final tax return with the FTB.
Once your charter has been terminated, you are not done. You must still notify others who are connected to your CA LLC. See the “How to dissolve your LLC” article below for these details.
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