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State of California Franchise Tax Board

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Big Business

How Do I Close my California Business Entity?

Business entities registered with the California Secretary of State (SOS) can dissolve, surrender, or cancel their businesses in California as follows:[1]

  • Domestic corporations (those originally incorporated in California) may legally dissolve.
  • Foreign corporations (those originally incorporated outside California) may legally surrender.
  • Limited liability companies and partnerships (both domestic and foreign) may legally cancel.

Businesses dissolve, surrender, or cancel when they are ceasing operations in California and need to terminate their legal existence here.

Basically, a business entity must pay all outstanding business entity income tax debts, file a final tax return, and file the proper forms with the California SOS to complete the dissolution, cancelation or surrender process.

Here are the steps to dissolve, surrender, or cancel a business entity:

  • File any delinquent tax returns.
  • File the final/current year tax return. On this tax return's first page, write FINAL at the top of the page and check the box labeled, "Final Return."
  • There is an exception for a nonprofit tax-exempt church or tax-exempt corporation – you do not need to file a final tax return if your three-year gross receipts average is under $25,000. However, you must file a final tax return if you exceed this average, if you are a private foundation, or if you have non-member or unrelated business income.
  • Pay all tax balances, including any penalties, fees, and interest.
  • File the appropriate dissolution, surrender, or cancellation form(s) with the SOS within 12 months of filing your final business' income tax return. To get the correct forms, go to, or call the SOS at 916.657.5448.
  • Suspended or forfeited business: You must revive your business before you file dissolution, surrender, or cancellation forms with the SOS. A suspended entity continues to accrue the $800 minimum tax indefinitely while the business is suspended.
  • Public benefit and religious corporations, and mutual benefit corporations holding charitable assets:  You must obtain a dissolution waiver from the Office of the Attorney General before you file dissolution forms with the SOS. For more information, go to charities at, or call the Office of the Attorney General Office at 916.445.2021.

Outstanding Liabilities

Dissolving, withdrawing, or canceling a business entity’s legal status does not nullify your legal tax requirements or outstanding liabilities. The entity or its transferees remain liable for the business entity’s tax debts.

A shareholder may be held personally responsible for the business' tax debt. For instance, sometimes business officers receive excessive funds or other assets from a business, preventing it from paying its tax debts. In general, the FTB cannot hold a shareholder liable for a corporation’s tax if, among other things, the shareholder did not take compensation without adequate consideration when the shareholder abandoned the corporation.[2]

It is important that you pay your business entity’s tax debts. If you are unsure if your business has a tax debt, please call us so we can help you resolve any tax issues.

  • Business entities inside the U.S.             888.635.0494
  • Corporations outside the U.S.                 916.845.7033
  • Partnerships and LLCs outside the U.S. 916.845.7166

Additional Information

[1] A business entity may have other options that are not covered in this article (i.e.: conversions, mergers).

[2] See Appeal of Howard Zubkoff and Michael Potash, Assumers and/or Transferees of Ralite Lamp Corporation (April 30, 1990) 90-SBE-004.

Back to June 2014 Tax News

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