The Dissolution of a Company (Explained)

If you have reached a point with your California company where you are considering closing down, there are multiple tasks you need to tackle right away. Because dissolution may require several steps, it is best you consult an attorney before getting started.

Under the California Corporations Code, there are different ways of dissolving a company. Generally, your path is dependent on whether or not all your shareholders vote to dissolve the company and other criteria discussed below. If you want to dissolve your California corporation, you need to understand which path is for you.

If the Vote for Dissolution is Not Unanimous

After you have decided to close the operations of your California company, the company shareholders need to vote on dissolution. If some shareholders vote against the dissolution, you need to file the following documents with the Secretary of State;

Certificate of Dissolution
Certificate of Election to Wind Up and Dissolve

The Dissolution Certificate must include, among other things;

a statement that the company has completely wound up
a statement that the company’s debts and liabilities have been paid
a statement that the company’s known assets have been distributed (if applicable)
a statement that the company acquired no known assets (if applicable)

And the Certificate of Election to Wind Up and Dissolve must have the following information;

a statement that the company has elected to wind up and dissolve
the number of shares that voted for the election
that the election constituted of shareholders that represent not less than 50% of the voting power
if a shareholder or shareholders sign the certificate, a statement that they were permitted to execute the certificate by shareholders holding shares that represent not less than 50% of the voting power.

If the Vote for Dissolution is Unanimous

If all shareholders vote to dissolve the company, you only need to file a Certificate of Dissolution with the Secretary of State.

Short Form Dissolution Certificate

Depending on some factors, a corporation can file a Short Form Dissolution Certificate. If your answer is “yes” to each statement below, then you are eligible to file this form.

You registered your company in California within the last year.
Your company does not have debts and liabilities (apart from tax liability).
Any tax liability will be assumed or fulfilled on a taxes paid basis.
You have filed or will file all required California tax returns with the Franchise Tax Board.
Your company has not conducted any business.
No shares have been issued, and if payments for shares have been received from investors, you have returned those payments.
The majority of directors or incorporators authorized the dissolution and elected to dissolve the company.
The assets have been distributed, or the company has not acquired any known assets.

In other words, the Short Form Dissolution Certificate is for companies that have been registered but have not done any business.

Lastly, regardless of the forms you file, to dissolve a California corporation, you are required to submit a Final Tax Return to the Franchise Tax Board.

Contact Us for Legal Help

If you are looking to dissolve your California corporation, it is vital that you retain the services of a skilled lawyer. A qualified and dedicated San Diego business lawyer at The Law Offices of Kris Mukherji can help you with the dissolution process. Contact us at KMSDLawOffice.com.