Dissolving a Limited Liability Company in California
Dissolving a Limited Liability Company, or LLC, is a legal process where the members of an LLC decide they no longer want to operate their business, and generally want to divide up the assets (if any).
To dissolve an LLC you must file the appropriate forms with California Secretary of State. In addition, depending on the conditions of the operating agreement the members must agree to the dissolution.
First, you must determine what your assets are. This would include everything from real property, leases, equipment, bank accounts, income from the business, inventory and accounts receivable.
Second, you must determine what your debts are including taxes, wages, credit lines, accounts payable and the like. Third, there must be a formal resolution to dissolve the LLC. This is essentially a written agreement among the members of the LLC that the company will be dissolved. Notice must be given to all members and owners of the LLC.
After you've formally agreed to dissolve your LLC, you need to contact the California Secretary of State to obtain the proper dissolution forms. The main form is called a Limited Liability Company Certificate of Dissolution.". An authorized representative of the LLC must sign the form. This form is available online.
Next, you will also need to prepare and complete an IRS Form 966, the Corporate Dissolution and Liquidation document. This form is also available online. However, we advise that you contact a Certified Public Accountant before sending in this 966 Form to the IRS.
In addition, your creditors must get notice of your company's intent to dissolve. You will need to give notice explaining to each that you are in the process of dissolving your LLC. The purpose of the letter is to explain that it is your desire to settle your account with each creditor.
Once you have filed the proper LLC dissolution and properly communicated with your creditors, the owners of the LLC can divide up the assets. California, however, requires you to pay your creditors before you liquidate and divide up your assets.