Your Bay Area business has voted to dissolve the LLC. What happens next? Dissolving an LLC is not just as simple as shutting the doors, throwing away the keys, and declaring the business closed. Under California law, there are formal dissolution requirements that business owners must follow.
Voting to Dissolve the LLC
Most LLCs are governed by a formal, structural document called an Operating agreement. Operating Agreements are like the legal blueprint for the LLC – they outline management, structure, profits/losses, and in most instances, how the dissolution process will work. Because the Operating Agreement is the LLC’s blueprint, the LLC’s members and managers are required to abide by it. So, for example, if the Operating Agreement requires a formal meeting with all members and managers, and requires that proper notice of the meeting be given a week prior, in order to vote on the dissolution, then this must be followed precisely. Otherwise, for one reason or another, one could technically argue that the LLC did not properly dissolve. In the event that an LLC’s Operating Agreement does not provide a specific dissolution procedure to follow, or if the LLC does not have an Operating Agreement at all, then the members and managers must abide by the California Revised Uniform Limited Liability Company Act, which outlines a method to dissolve the LLC.
Winding Up Business
There are some formal tasks that an LLC must do to wrap up its business prior to dissolution. The California Revised Uniform Limited Liability Company Act refers to this process as “winding up,” and any LLC member who assists in winding up is entitled to receive fair compensation for their work. Some of the winding up tasks include:
- Collecting and dividing LLC assets
- Disposing of LLC assets
- Handling court-related actions for or against the LLC in order finalize obligations or to collect necessary assets
- Putting creditors on notice of the upcoming dissolution
Giving Notice to Creditors
The California Revised Uniform Limited Liability Company Act requires that any dissolving LLC provide adequate notice about its winding up to all creditors or related claimants who appear in the LLC’s records. Apart from creditors, some of the parties who may need to receive notice include landlords, banks, accounting firms, as well as utility and other service providers. This task can be quite tedious, but it must be done properly, in which case a Bay Area business law attorney can assist in the process.
Handling Tax Matters
When you file your final dissolution papers with the California Secretary of State, one of the things you will need to provide is a statement about your final LLC tax return. You will need to swear, under penalty of perjury, that you have filed (or will file) the necessary final tax returns with the California Franchise Tax Board. The final dissolution papers, further described below, must be filed within 12 months of the date of your last LLC tax return.
Filing Necessary Papers with the CA Secretary of State
Once the LLC’s members have finished winding up all of the LLC’s business and related affairs, the LLC must file one or two documents with the California Secretary of State. If the vote to dissolve is unanimous, the LLC needs to file a Certificate of Cancellation (more information about the Certificate of Cancellation can be found here). Make sure to include your LLC name, LLC filing number, and a statement regarding the LLC’s tax returns. There is no fee for the service unless it is delivered by hand, in which case the fee is $15. If the vote to dissolve is not unanimous, the LLC will need to file both a Certificate of Cancellation and a Certificate of Dissolution (more information about the Certificate of Dissolution can be found here).
Contact a Bay Area Corporate Lawyer Today with any Questions About Dissolving a California LLC
Making sure that you properly dissolve your California LLC is important. An experienced Bay Area startup attorney can be extremely helpful during the process. Call Structure Law Group at 408-441-7500 today or contact us online to set up a consultation.