business closure

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 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. Check the applicable Final Return box on the first page of the return and write “final” at the top of the first page. All tax returns remain subject to audit until the statute of limitations expires.
  • 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.
  • Currently, LLCs can submit termination forms online. Online submission for Corporation and Partnership dissolution/cancellation forms is not available at this time.

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.

For more information, go to revive your suspended or forfeited business entity.

Voluntary Dissolution/Cancellation

If certain qualifications are met, a business entity may be able to voluntarily dissolve. A qualified domestic corporation or qualified domestic limited liability company can request voluntary administrative dissolution/cancellation. With a written request, a business must certify it:

  • Is not actively engaging in any transaction for the purpose of financial or monetary gain or profit.
  • Has stopped doing business or never did business.
  • Does not have any remaining assets.

Once the SOS formally dissolves or cancels the business, FTB may abate:

  • Unpaid qualified taxes
  • Unpaid qualified interest
  • Unpaid qualified fees
  • Unpaid qualified penalties

For more information, go to voluntary administrative dissolution/cancellation.

Additional Steps

There are some additional steps to consider when closing a business entity:

  • Notify all creditors, vendors, suppliers, clients, and employees of your intent to go out of business.
  • Close out business checking accounts and credit cards.
  • Cancel any licenses, permits, and fictitious business names.
  • Publish a statement in a local newspaper of general circulation near the principal place of business that your business entity is no longer in business.
Voss Real Estate Advisors

July 9, 2024

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