This article has been updated with the new guideline from California Secretary of State.

If you own a business operating in California and have made the decision to close the company’s doors, being organized and thorough is key. Deciding to close the business is only the very first step in an extended process. While closing your California business will take time, effort, and organization, you can rest easy in knowing that when the process is completed properly, you’ll avoid hassle down the line.

 Follow these steps to bring your business in California to an end:

 

Step 1: Receive approval from business owners, directors, or members.

Once you have the intent to close your California business, you need to gain the approval of owners, directors, or members, depending on the type of business. In California, if the vote to dissolve or cancel your business is unanimous, you’ll typically have less paperwork to file with the state.

If you own an LLC and have a unanimous member vote to end the business, you can just file a Certificate of Cancellation. If the vote wasn’t unanimous among members, you need to file a Certificate of Dissolution before or along with the Certificate of Cancellation.

In California, corporations can file a Certificate of Election to Wind Up and Dissolve if the election to dissolve wasn’t unanimous among shareholders. If the vote was unanimous, you only have to file a Certificate of Dissolution.

 

Step 2: File a final federal tax return and a final California state tax return.

When you’re closing your California business, it’s important to file a final state and a final federal tax return prior to filing dissolution or cancellation paperwork. You must also pay all taxes owed, including fees, interest, and penalties as applicable.

 When you file your final tax return for the business, check the “Final Return checkbox located on the first page of the return. Also, write “final” at the top of the first page of your return.

 After the final taxable year for your business, your business is legally obligated to stop conducting business in California.

 

Step 3: File dissolution or cancellation paperwork with the California state government.

After filing the final tax return for your business, you have a year to file the official paperwork to close your business. As aforementioned, the paperwork that you’re required to file with the California Secretary of State depends on whether or not the vote to end your business was unanimous.

The forms that you need to file with the California Secretary of State also depends on what type of business you own. There are different forms for corporations, tax-exempt corporations, limited liability companies, and limited liability partnerships, among others. Forms are available at ftb.ca.gov.

 

Step 4: Inform creditors of the decision to close the business.

The next step in closing your California business is to notify creditors of the intent to dissolve or cancel. In California, your notice to creditors must be sent in writing after your dissolution paperwork has been approved.

California law is different from that of some other states in that is doesn’t provide a deadline for creditors to make claims by. So, you won’t need to include a deadline for claims in your notice to creditors, and they’ll typically have four years from the dissolution date to make claims against your business.

 

Step 5: Cancel licenses, permits, and contracts for your business.  

To completely close the doors of your California business, you need to cancel licenses, permits, and other contracts under the business’ name. If you have a property lease for the business, contact the property owner to negotiate the end of the lease. To close out a seller’s permit, contact the California Board of Equalization. To cancel a business license, contact the city in which you registered for it.

 

Step 6: Distribute any remaining business assets to shareholders or members.  

After all taxes, claims, fees, and any other expenses have been paid in full, you must distribute the remaining company assets among company members or shareholders. Assets are typically distributed according to ownership percentage and include profits, financial investments, and physical property.

 

Step 7: Notify employees and clients of the business closing.  

To maintain amicable relationships with former employees and clients, inform them of the closing of the business as soon as it’s made official. This will help you maintain a positive reputation among other professionals in your industry.  

If you’re seeking to close your business in California, you can officially eliminate its presence in the state by following the steps above. Once the process is complete, your business will be officially closed in California and you can move onto your next endeavor.