Closing the Doors: How to Dissolve a Corporation in California

Running a corporation in California can be a very exciting and profitable experience. There may come a time, however, when you decide it’s time to shut your business down. Often people make this decision because they wish to retire or start a different business or when the company simply isn’t making enough money. No matter the reason, you must dissolve the corporation legally in California, or you might find yourself facing penalties or even liability for past corporate acts long after your business has ceased its operations.   

Starting the Dissolution Process

The process of dissolving a corporation is governed by California’s General Corporation Law. In order to start the process, shareholders who possess at least 50% of the corporation’s combined voting power must vote to dissolve. While not strictly required by the law, it is common practice for a board of directors to submit a proposal to dissolve to their shareholders. They will then call a meeting of the shareholders to vote on the proposal. The board members will need to review the articles of incorporation, which often include specific dissolution instructions.

Filing the Certificate of Election to Wind Up and Dissolve

In situations where the shareholders do not agree unanimously to dissolve, you will need to file a Certificate of Election to Wind Up and Dissolve with the Secretary of State. This file will need to include a statement indicating that the corporation has elected to wind up and dissolve, the number of shares that voted in favor of this election (which must be at least 50%), and a statement showing that the shareholders were authorized to execute this, if relevant.

Winding Up the Company

After its dissolution is approved, the corporation will remain in existence only as long as it is necessary to “wind up” the company’s final matters. There can be a wide range of different matters that need to be dealt with, including items such as:

  • Paying debts and liabilities;
  • Filing and paying final taxes;
  • Distributing remaining assets to shareholders and other entitled parties;
  • Notifying all known creditors and claimants about the dissolution; and
  • Notifying all shareholders of the dissolution.

Filing a Certificate of Dissolution

After the winding-up process has been completed, you will have to file a Certificate of Dissolution with the Secretary of State. This will include a statement that the corporation has finished winding up, a statement that the known debts and liabilities have been paid (or adequately provided for), a statement that all known assets have been distributed, and a final statement that the corporation is dissolved. This is done using Form DISS STK. Once filed, your business name will become available for others to use.

Dissolution is an Important Legal Process

The dissolution of a corporation in California is a legal process that needs to be handled properly. Having an attorney ensures that all legal requirements are met correctly can help you avoid potential delays or penalties. Please note that the steps described above are general; your situation will likely be more complicated since there can be many factors that require additional action. Contact us to schedule a consultation and learn how we can help you dissolve your corporation as quickly and efficiently as possible.

Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.