Dissolving a Business Entity in California
It can occur that it is better to close down your existing business because of various causes, i.e. you have no more time to manage it. For example, in California, every corporation must pay $800 annual minimum franchise tax, even if the corporation did not transact any business. It is clear that the best option is to dissolve your business entity, if you have no business activity. Thus, it is more desirable to wind up and close an inactive corporation.
Whatever your reasons for dissolving your business in California, you will face a variety of legal tasks you need to do in order to protect your reputation and your credit if you are going to run a business again. However, it is not so easy as it may seem.
Below The Margarian Law Firm lawyers will explain you what steps you need to follow in order to dissolve a legal entity in California.
1. Take a decision to close an existing business in California
Under California law, if you operate a sole proprietor, it is up to you to decide when your business should be closed. Whereas if you formed a legal entity as a partnership, limited liability company (LLC), or a corporation, the decision should be taken according to the articles of organization with your associates. However, the final decision should be documented under the form of a written agreement.
2. Get legal advice
Closing a business in California is a multi-step process. It is better to get a professional help. You can try to get advice from lawyers, tax experts, bankers, and accountants.
3. File articles of dissolution
If you have not legally dissolved your LLC or corporation you will be liable for taxes and other payments. If you want to know more about dissolution documents, contact a California business attorney who is ready to explain whether you should notify the government and creditors of your decision and how you should do it.
4. Cancel registrations, licenses, permits and business names
If you are registered under a trade name and you want to protect your reputation, it is desirable to cancel all licenses and permits. Moreover, if you have cancelled your permits and licenses, you will be no more responsible for taxes and penalties incurred after it.
5. Pay the final paychecks to employees and comply with labor law
Pursuant to the Worker Adjustment and Retraining Notification Act (WARN), it is set forth if you are an employer and you have 100 or more employees, the written notice of the closing must be provided at least 60 calendar days advance. If you want to avoid future lawsuits, it is preferable to pay all wages to your employees.
6. Resolve all financial obligations
In order to close your business, it is preferable to pay all taxes, business debts, and close accounts.
Thus, when you close down your business, it is desirable to notify the following persons in order to avoid future problems with debts and other financial obliagtions:
- Service providers,
- Bank accounts and credit cards,
- Landlords(at least 30 calendar days advance),
7. Maintain records
Depending on your activity and location of your business, you may be required to keep tax and employment records from three (3) to seven (7) years even after closing your business.
Not always people dissolve their business because they want to do it. For example, bad financial conditions can cause such decision. So what to do if you are not able to pay all your debts? First of all, try to understand of options you have and contact a professional and experienced California business dissolution lawyer.
The Margarian Law Firm lawyers will help you to understand how you may minimize all possible risks as well as do not lose your personal assets. We offer a high level of competence in California business law with a focus on the core needs of our clients. Our lawyers are particularly committed to keeping a practice of professional secrecy and ensuring legal security necessary to our clients.
Make an informed decision you need!
Call 818-553-1000 and you will get a free initial consultation from The Margarian Law Firm Lawyers.