Shutting down a business in California involves more than ceasing operations. To fully terminate your legal obligations, you must complete a series of formal steps. Failure to do so could leave you liable for ongoing taxes, filings, or penalties—even after you’ve stopped conducting business.
Review your governing documents
Start by examining your company’s foundational agreements. For LLCs, this means your operating agreement; for corporations, refer to the bylaws. These documents usually outline procedures for dissolution, including voting thresholds, written resolutions, and notice requirements. Follow these protocols precisely, especially if there are multiple members or shareholders involved.
File dissolution documents with the state
Once the internal requirements are satisfied, file the appropriate dissolution forms with the California Secretary of State. LLCs typically submit Form LLC-3 or LLC-4/7, while corporations use Form DISS STK. You must also file a final tax return with the California Franchise Tax Board, making sure to check the box that indicates closure. Additionally, terminate any business licenses, seller’s permits, or fictitious business names associated with your entity.
Resolve debts and distribute assets
Before you can distribute any remaining assets, you’re required to settle all outstanding debts. This includes payments owed to vendors, service providers, taxing authorities, and other creditors. Notify creditors in writing and provide a window for them to submit claims. Once liabilities are cleared, distribute residual assets in accordance with ownership percentages or as stipulated in your agreement.
Be sure to inform employees, clients, and vendors about your business’s closure. Cancel all relevant licenses, permits, and accounts. Retain important records—such as tax filings, dissolution documents, and financial statements—for a minimum of seven years. These records can serve as proof of proper dissolution if questions arise later.