How To Close A Business
Most people are aware of how difficult it is to open a business in California because of the multitude of decisions that have to be made. However, to close a business is not as simple as walking away from its operations. There are specific steps a business owner must follow in order to properly close down their business, regardless of the personal reason for doing so. In most cases to close a business, there has to be a vote with the rest of the owners or partners, the owner must then dissolve the business with the state, cancel any related permits and licenses, pay their remaining taxes and debts, and finally, notify everyone involved with the business.
Dissolving With The State Government
Among the various legal business entities, those who conduct business as a corporation or a limited liability company (LLC) must officially dissolve the legal entity with the state. If instead a partnership was formed, while not necessary to file with the state, officially filing does allow for creditors to be put on notice. Dissolving with the state is important because this allows for the owners to no longer be liable for business taxes or debts. While an LLC must file an Article of Dissolution with the state of California, a corporation must submit both a Certificate of Dissolution and a Certificate of Election to Wind Up and Dissolve to the California Secretary of State.
Closing A LLC Corporation
Given that once a corporation or LLC has dissolved they must no longer file state taxes, they must first receive permission to do so from the tax board. This permission proclaims that the close a business has paid all of its required taxes up to the point of its dissolution.
The State of California Franchise Tax Board has several requirements. First, the close a business must file the current year tax return and check that it is the final return of that business. This signals that the business entity will no longer (nor will it be allowed to) conduct operations after that final taxable year. Furthermore, within 12 months of filing the previous final return, the business must submit to the state its appropriate dissolution forms, as discussed previously.
