Want to Close a California Business Entity

How to Close a Business Entity

As difficulties with the economy for some small business owners persist, it may be a good time to close a California business entity. Business entities doing or transacting business in California or registered with the California Secretary of State (SOS) can dissolve, surrender, or cancel when they cease operations in California and need to terminate their legal existence.

• Domestic corporations (those originally incorporated in California) may legally dissolve.

• Foreign corporations (those originally incorporated outside California) may legally surrender.

• Limited liability companies and partnerships (both domestic and foreign) may legally cancel.
  

Steps to Dissolve, Surrender, or Cancel a California Business Entity

If your client plans to dissolve, surrender, or cancel their California business entity, realize that it involves a multi-step, multi-state agency process that has requirements with both Franchise Tax Board (FTB) and SOS.

FTB Requirements

• File all delinquent tax returns and pay all tax balances, including any penalties, fees, and interest.

• Timely file the final tax return.

• Must cease doing or transacting business in California after the final taxable year.

SOS Requirements

• File the appropriate dissolution, surrender, or cancellation form(s) with the SOS within 12 months of filing your final tax return.
  

If a business entity is suspended or forfeited, it will need to go through the revivor process and be in good standing before being allowed to dissolve, surrender, or cancel. To revive a suspended or forfeited business entity, the business owner must:

• File all delinquent tax returns.

• Pay all delinquent tax balances, including penalties, fees, and interest.

• File a revivor request form.

Find out how to properly close down your business. Please contact us for more information.

Disclaimer: Majority of information above is from Franchise Tax Board of State of California.