Dissolving Your California LLC

Dissolving an LLC in California requires a formal process that ends the limited liability company's existence as a business entity registered with the state. If your LLC is currently suspended, you must bring it into good standing before pursuing dissolution. The dissolution process puts the LLC out of reach of creditors and ties up other loose ends.

The first step in voluntarily dissolving a California LLC is checking the operating agreement and articles of organization, which often include a procedure for formally dissolving the company. In most cases, these documents will note that the LLC members vote on a resolution to dissolve the company and indicate a specific percentage required to approve the resolution. Follow all requirements detailed in these documents, such as setting a specific date and time for the vote and providing members with advanced notice. 

California also allows an LLC to dissolve if a majority of members or a greater percentage than specified in the operating agreement vote in favor of this action. After members vote to dissolve the LLC, you must file a certificate of cancellation and record the approval decision on a written consent form or in the official meeting minutes. Keep in mind that dissolving your LLC will not halt legal proceedings against the company.

Certificate of Dissolution

If your LLC members have unanimously voted to dissolve the LLC, a certificate of cancellation is sufficient; this should be filed with the Secretary of State. If the vote was not unanimous, you must file a certificate of dissolution. This form includes a file number and the name of the LLC along with a return mailing address and at least one authorized signature. The certificate of dissolution does not require a filing fee. If you deliver the document in person to the Secretary of State office in Sacramento, it is subject to a $15 handling fee. You can also receive expedited service for a fee, since normal service can take several weeks.

To receive file-stamped copies of your certificate of dissolution, include two additional copies with your mailing. Note that once you dissolve your LLC, another entity can immediately apply with the same or similar business name.

Winding up Business

After the certificate of dissolution is filed, the LLC exists only to wrap up certain final managers. You can designate one or several members or managers to handle these tasks. Winding-up tasks designated by the state's LLC Act include: 

  • Collecting and discharging outstanding legal obligations through prosecution or defense actions.
  • Collecting and distributing LLC assets.
  • Distributing and/or disposing of LLC property.

Assets must be divided in a specific order: 

  • Pay known liabilities and debts of the LLC, including those owed to LLC members as well as all outstanding taxes.
  • Pay interim distributions to members as required by your operating agreement. These are usually valued based on the member's individual contribution.
  • Pay remaining assets to LLC members. First, return their initial contributions, then pay out the remaining funds based on typical distribution percentages unless your operating agreement states otherwise.

Notice to Creditors and Claimants

In California, an LLC that has dissolved must mail a notice to that effect to all creditors and claimants whose addresses are on record. It may be prudent to hire a business attorney to assist with this legally binding document.

Certificate of Cancellation

After winding up official business, file the LLC certificate of cancellation with the Secretary of State. This document requires the official LLC name and filing number, along with a statement indicating that the final tax return has been filed with the Franchise Tax Board. You can download the required form from the Secretary of State website.

When you fill out the form, you can check a box indicating that members voted to dissolve the LLC and sign a specific tax statement. You'll also need to provide a return mailing address and at least one authorized signature.

For most LLCs, Form LLC-4/7 is the correct document. Do not use the short form, LLC-4/8, unless your LLC has not conducted any business during its existence. As with the certificate of dissolution, there is no filing fee unless you deliver the document in person or want expedited service.

If you need help with dissolving an LLC in California, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.