Certificate of Dissolution LLC 3: Everything You Need to Know
A California LLC, or limited liability corporation, is a company formed in the Sunshine State that has characteristics of both a partnership and a corporation for various purposes.3 min read
3. Tax Status and Miscellaneous
A California LLC, or limited liability corporation, is a company formed in the Sunshine State that has characteristics of both a partnership and a corporation for various purposes. As a legal entity, an LLC has an existence in terms of law that needs addressing if you choose to make any changes to it. If you intend to dissolve your California LLC, there are several important considerations that you need to deal with.
Dissolving an LLC
In order to dissolve your California LLC, you need to make sure that the company has an active status in the state. This means that if it has been suspended, you need to bring it back first. You'll also need to file a set of documents with the secretary of state for California, though exactly what you will have to file will vary based on the circumstances of the dissolution.
There are three main ways to dissolve an LLC in California law:
- Filing a Form LLC-3 and Form LLC-4/7, or a Certificate of Dissolution and a Certificate of Cancellation.
- In the instance of a voluntary dissolution, you may be able to file a short form instead.
- There may also be rules contained in your formational documents allowing dissolution after a vote by LLC members, as long as the vote follows procedural safeguards.
In general, the more LLC members agree to the dissolution, the less paperwork and effort there will be. After the necessary permissions are granted and the votes are recorded, the forms need to go to the secretary of state, along with fees that scale up for expedited or same-day processing of the request.
It is important to note that dissolving an LLC does not immediately make legal problems or debt vanish. Instead, California law will now recognize the LLC as existing for as long as it takes to resolve final issues, referred to as the winding-up tasks. These will need to be handled by LLC members before they can finally walk away. They consist of:
- Prosecuting or defending any pending legal actions by or against the LLC to handle its obligations.
- Dealing with the remaining property of the LLC, whether through sale, destruction, or other means.
- Dividing up any remaining assets, including any generated by the two previous steps.
- Pay all known debts of the LLC, or make reasonable provisions to pay them, especially including taxes.
- Generally, you'll be required to continue to make interim distributions to members while you wrap things up, though formational documents can stipulate otherwise.
- Mail a notice of the dissolution to all creditors in LLC records. This should be drafted by an attorney.
- If you are filed in other states as an LLC, you will need to tend to dissolution in them as well. Requirements and the associated terminology will likely be very different from state to state.
Tax Status and Miscellaneous
Note that you can start the dissolution process in California without filing taxes immediately for the last year of operation, but you'll need to state in your forms that you intend to file taxes for that time period. You will need to make good on this promise to file, and also make sure you make good on any taxes on your employees' salaries during this time. This tax return needs to clearly state that it is the final return the LLC will be filing.
You will also want to make sure that any miscellaneous licenses or other financial obligations are taken care of. You will want to cancel your workman's comp, get any permits revoked to prevent fraud and damage to your reputation, and shut off any liability insurance. Any landlords or other equipment or facilities rental services you use will need notification that your business will no longer require them, and you'll need to make sure your leases are up.
Finally, it is good form to notify employees and customers well in advance, so that those who need to make other arrangements in the interim can do so. Just because you are not operating a business in this area at the moment doesn't mean you never will again, and a knock to your reputation can hold you back.
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