You may have several reasons to close down your business—from financial problems to retirement. When you are ready to close your business for good, it is not as simple as just hanging up your hat and walking out. Instead, you have certain legal obligations that you must meet for your corporation to be considered legally dissolved.
In California, C-corporations have certain annual reporting requirements and fees. You must address these requirements even if the company is not actually doing business anymore. Therefore, it makes sense to simply dissolve the company if you are no longer interested in managing it and you do not want to sell it. You can use this quick guide as a starting point for winding up your California C-corp.
Winding Up a C-Corp in California
When you legally wind up and dissolve your business, you put the business entity and its assets out of reach of creditors and end any obligations you may have to the State of California. The law provides very specific steps that you must follow for an official dissolution of your corporation.
- Vote for dissolution.
Unless the bylaws specify otherwise, at least 50% of the voting shareholders must vote for dissolution. There is no specific requirement that the Board of Directors takes any action before the shareholders conduct this vote. The vote must be memorialized in a written “consent” document evidencing that those shareholders want to dissolve the company. If you do not have unanimous consent, you should notify the other shareholders as soon as possible about impending dissolution.
- File a Certificate of Election to Wind Up and Dissolve.
If you have unanimous consent, you can skip this step. However, if the vote was not unanimous, you will need to file an Election to Wind Up and Dissolve with the California Secretary of State. The certificate includes a general statement that the corporation has elected to terminate, the number of votes, and a statement that the person executing the document was so authorized.
- “Wind up.”
Once the shareholders have approved the dissolution, the corporation only exists to carry out specific tasks that must be completed before it can dissolve. This usually involves things like selling assets and paying debts and liabilities. The corporation must pay all its debts and liabilities before it can distribute assets to shareholders. As part of this process, you are required to notify all creditors of the winding up procedures.
- File a Certificate of Dissolution.
Once you have completed the winding up process, you must submit a Certificate of Dissolution with the Secretary of State. This statement concludes the dissolution activities, but it can take up to eight weeks or more to fully process.
Getting Legal Help
There are special rules for companies that have not issued stock yet, are going through bankruptcy, or that have not conducted business in the past five years. You may also need to take additional steps if your corporation was registered in any other state as well. If your organization meets any of these criteria or you want help with a traditional wind-up, Integrated Legal Counsel can help. Call today for more information.
- Simplifying Cal/OSHA Workplace Safety in California - March 4, 2024
- Cracking the Code of California’s E-Commerce Laws - March 4, 2024
- Surveillance in the Workplace: How Far Can Employers Legally Go? - February 21, 2024
