To dissolve an LLC in California, you need to hold a member vote to end the company, wind up its business by paying debts and distributing remaining assets, file a final tax return with the Franchise Tax Board, and then file a Certificate of Cancellation with the Secretary of State within 12 months. Skipping any of these steps leaves the LLC legally alive and on the hook for the $800 annual tax year after year.
Step 1: Vote to Dissolve
California law lets members end an LLC when those holding at least 50 percent of the voting interests vote in favor, unless the operating agreement or articles of organization set a higher bar.1California Legislative Information. California Corporations Code 17707.01 Read your operating agreement before you do anything else. It may require a supermajority or unanimous consent, and it may prescribe notice, a waiting period, or a buyout right for dissenting members. Those terms control when they demand more than the statute does.
Whether the vote is unanimous matters at the filing stage, because it determines which Secretary of State forms you need. Document the vote in writing and keep it with the LLC’s records.
Step 2: Wind Up the Business
Once the vote passes, the LLC enters winding up. The company stops normal operations and works only on closing out: collecting receivables, selling or distributing assets, and paying what it owes. New business unrelated to the wind-down is off limits.
Notify known creditors that the LLC is dissolving and give them a chance to submit claims. Pay all debts, obligations, and liabilities before anything goes to members. Order matters here. Creditors first, members second. Once debts are settled, remaining assets are distributed according to the operating agreement; if the agreement is silent, members receive their proportional shares.
Do not distribute to members while debts are still outstanding. If you do, members can lose the LLC’s liability shield for those unpaid obligations and become personally responsible for them.
Step 3: File a Final Return and Clear the FTB
The Secretary of State cancellation form includes a certification that all final tax returns have been or will be filed, and the Franchise Tax Board independently tracks whether the LLC is current.2California Secretary of State. Certificate of Cancellation Limited Liability Company The tax side has to be handled before the state will let you close the entity.
File a Final Form 568
File a final Limited Liability Company Return of Income (Form 568) with the FTB.3Franchise Tax Board. Limited Liability Company Check the “Final Return” box on the first page and write “FINAL” across the top. Your tax year ends on the date the LLC stops doing business in California, so a mid-year close means a short-period return.
Pay the $800 Annual Tax and Any LLC Fee
Every California LLC owes the $800 annual tax for each year it exists, including the final year, whether or not it did any business.3Franchise Tax Board. Limited Liability Company For a calendar-year LLC, the tax for the current year is due by April 15.
If the LLC had California income of $250,000 or more in its final year, an income-based fee applies on top of the $800 tax:3Franchise Tax Board. Limited Liability Company
- $250,000 to $499,999: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
Any delinquent returns from prior years must also be filed and paid in full, with penalties and interest, before the FTB will treat the account as settled.4California Franchise Tax Board. Closing a California Business Entity
The 12-Month Window
After you file the final return, you have 12 months to file cancellation paperwork with the Secretary of State.5Franchise Tax Board. FTB Publication 1038 Miss that window and you will likely need to file additional returns and pay another year (or more) of the $800 tax before the SOS will accept the cancellation.
Step 4: File Cancellation With the Secretary of State
The formal legal end of the LLC happens when the Secretary of State processes your cancellation. There is no filing fee.6California Secretary of State. Limited Liability Companies – California File online through bizfile Online for fastest processing, or submit by mail or in person in Sacramento.
If All Members Voted Yes
File only the Certificate of Cancellation (Form LLC-4/7). Check the box confirming the vote was unanimous; that eliminates the need for a separate Certificate of Dissolution.2California Secretary of State. Certificate of Cancellation Limited Liability Company The form also requires a statement that all final tax returns have been or will be filed with the FTB.7California Legislative Information. California Corporations Code 17707.08
If the Vote Was Not Unanimous
You need two filings. File the Certificate of Dissolution (Form LLC-3) first to put the public on notice.8California Secretary of State. Certificate of Dissolution and Certificate of Cancellation Then, once winding up is done, file the Certificate of Cancellation (Form LLC-4/7). Both can be filed together if winding up is already complete.7California Legislative Information. California Corporations Code 17707.08
Short Form for New LLCs That Never Operated
If your LLC was formed within the last 12 months, never conducted business, and has no debts or liabilities, you can use the Short Form Cancellation Certificate (Form LLC-4/8) instead of the standard process.9California Secretary of State. Short Form Cancellation Certificate Limited Liability Company Every required statement on the form has to be truthful; if any is not, you go through the normal cancellation process. An LLC that qualifies for the short form also avoids the $800 annual tax for its first tax year.3Franchise Tax Board. Limited Liability Company
What Happens If You Just Walk Away
Closing the bank account and stopping operations does nothing in the state’s eyes. The FTB keeps billing the $800 annual tax every year. Eventually the LLC gets suspended, and suspension is where the real damage starts.10Franchise Tax Board. My Business Is Suspended
A suspended LLC cannot legally do business, sell or transfer real property, file a lawsuit, defend one, or even close itself. You cannot dissolve a suspended LLC. You have to revive it first by filing every past-due return and paying all back taxes, penalties, and interest, and only then can you cancel. The FTB can also impose a $2,000 penalty per tax year for failing to file returns within 60 days of a written demand.10Franchise Tax Board. My Business Is Suspended
Contracts signed while the LLC is suspended are voidable by the other side. A client, vendor, or partner can walk away and claim the deal was never enforceable. Relief from contract voidability costs $100 per day, capped at the tax due for the period.10Franchise Tax Board. My Business Is Suspended If you know the business is done, file the paperwork now. Every year of delay adds at least $800.
Handle the Federal Side Too
California dissolution does not close the LLC’s federal accounts. That is a separate process with the IRS.
A multi-member LLC taxed as a partnership files a final Form 1065 with the “Final return” box checked and issues final Schedule K-1s to each member. A single-member LLC reports its final activity on Schedule C of the owner’s Form 1040. Assets sold or distributed during winding up may need to be reported on Form 4797, and how those distributions are taxed depends on the asset category. A tax professional is worth the money in the final year, when several asset types often move at once.
The IRS never cancels an EIN, but you can close the business account tied to it. Send a letter with the LLC’s legal name, EIN, business address, and the reason for closing the account, along with a copy of the EIN assignment notice if you have it, to:11Internal Revenue Service. Closing a Business
Internal Revenue Service
Cincinnati, OH 45999
The IRS will not close the account until all required returns are filed and all taxes paid.11Internal Revenue Service. Closing a Business
After the Cancellation Is Accepted
Close every bank account and credit line held in the LLC’s name and EIN. Cancel business licenses and permits with each city and county where the LLC was registered. If you let these lapse informally, renewal notices and compliance fees can still land in your mailbox months later.
Keep the records. California’s statute of limitations on tax assessments generally runs four years from the return’s due date or filing date, whichever is later.12California Franchise Tax Board. 2025 Instructions for Form 568 Limited Liability Company Tax Booklet The IRS window is similar. Hold onto tax returns, bank statements, and supporting documents through that period at minimum. Keep the operating agreement, articles of organization, dissolution vote records, and filed cancellation certificate indefinitely; they are your proof the LLC was properly closed if a question surfaces years later.
If the LLC carried professional or general liability insurance on a claims-made basis, cancelling the policy at dissolution leaves a gap. Claims-made policies only cover claims reported while the policy is active, so a suit filed next year over work done last year would fall outside coverage. Tail coverage, or an extended reporting period, fills that gap and typically runs two to five years. Match its length to the statute of limitations for the kind of claim the business might face. Service businesses and professional practices should not skip this.