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  • Writer's pictureLindsay Spiller

A Guided Tour Through the Process of Dissolving Your LLC in California

Updated: Dec 31

A picture of an "out of business" sign

As a small business lawyer, I have guided countless entrepreneurs through the complex legal landscape of starting and maintaining a business. But what happens when it's time to wind down operations and dissolve your Limited Liability Company (LLC)? If your business is in California, there's a specific process and several pitfalls to avoid. Let's dive in and understand the intricacies of dissolving an LLC in California.

The Process

1. Vote to Dissolve Your LLC

The journey toward dissolving your LLC begins with a formal decision. This typically entails holding a meeting with all the members of the LLC and taking a vote. Document this decision as a written resolution and keep it in your company's records. If your LLC operating agreement doesn't detail a dissolution process, California law requires the consent of a majority of the members.

2. Settle All Debts and Obligations

Before you can dissolve your LLC, you must settle all outstanding business obligations. This includes paying off debts and addressing any other liabilities. If insufficient funds cover these obligations, you may have to sell the LLC's assets. In the event of leftover funds after settling debts, members of the LLC should divide them according to their ownership percentage in the company.

3. File a Certificate of Dissolution

To officially kick-start the dissolution process, you must file a Certificate of Dissolution (Form LLC-3) and, if needed, a Certificate of Cancellation (Form LLC-4/7) with the California Secretary of State's office. These forms can be mailed to the Secretary of State, Business Entities, P.O. Box 944228, Sacramento, CA 94244-2280, or delivered in person at 1500 11th Street, 3rd Floor, Sacramento, CA 95814. One common mistake many businesses make is neglecting to file these essential forms, causing the business to continue existing in the eyes of the state. Consequently, you may still accrue taxes and penalties.

4. File Final Tax Returns

After dissolving your LLC, you must file your final state and federal tax returns. In California, you must file a final return with the Franchise Tax Board (FTB). Remember to check the 'final return' box on the form. If you fail to do this, the FTB may assume your business is continuing operations and continue to assess taxes.

5. Notify Interested Parties

Notify all stakeholders about your LLC's dissolution. This includes creditors, suppliers, and customers. Sometimes, you may also need to announce the dissolution in a local newspaper. This step is often overlooked, resulting in unnecessary legal complications.

6. Distribution of Assets

Lastly, distribute any remaining assets among the LLC members per your operating agreement guidelines. Remember to record the distribution process for your records.

Avoiding Common Mistakes in Dissolving Your LLC

At Spiller Law, we handle a number of business transactions, and we have seen many small businesses falter during the dissolution process. Two common mistakes are failing to pay final taxes and neglecting to close the business with the state formally. Be sure to navigate these crucial steps with care.

• Understanding the Costs

Dissolving an LLC in California involves several costs, such as filing fees. For instance, as of my last update in June 2023, filing a Certificate of Dissolution costs $30. However, these costs can increase if you enlist the help of a business lawyer. At the same time, it might seem like an unnecessary expense, but having legal assistance can ensure a smooth dissolution process and prevent costly mistakes.

• The Value of a Business Lawyer

Navigating the dissolution process alone can be confusing and intimidating. A qualified business lawyer provides expert guidance, helping you avoid common pitfalls and ensuring all your bases are covered. When it comes to complex tasks like settling disputes, finalizing tax returns, and allocating remaining assets, the guidance of a seasoned lawyer is indispensable.

• Wrapping Up

Dissolving an LLC involves much more than closing your doors and going home. You must follow a formal process to comply with California law, from the initial vote for dissolution to filing the necessary forms and settling all financial obligations. Each step has potential errors that can lead to penalties or other legal complications.


While the process may seem daunting, you don't have to go it alone. Engaging a business advisor or business lawyer like those at Spiller Law in San Francisco can give you peace of mind knowing you're following the correct procedures and avoiding potential legal pitfalls. We offer free consultations to help you get started.

The journey to dissolve an LLC may be bittersweet, but remember, it’s another step in your entrepreneurial journey. Handle it with the same diligence as any other business venture, and keep the lessons learned close as you venture onto your next big idea.

Spiller Law is an advisor to startup businesses, entertainment and media companies, and artists. Feel free to schedule a free consultation.


Spiller Law is a San Francisco business, entertainment, and estate planning law firm. We serve clients in the San Francisco Bay Area, Silicon Valley, Los Angeles, and California. Feel free to arrange a free consultation using the Schedule Appointment link on our website. For other questions, call our offices at 415-991-7298.


The information provided in this article is for general informational purposes only and should not be construed as legal advice or opinion. Readers are advised to consult with their legal counsel for specific advice.


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