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Starting the process of dissolving a California business entity

Why might you want to end a California business? The most obvious reason, and likely the one that first comes to mind, is because the venture has become unprofitable. But, there are many other reasons a business dissolution could be necessary.

Perhaps business partners want to branch out and go their separate ways. Maybe the primary manager is retiring. Or, new regulations could force a business to close up shop in California, even though it may resurface in some other state.

Whatever your reasons for pursuing a business dissolution, it is important to go about the process properly. An effective business dissolution can minimize your losses, protect your reputation and ensure that you are equipped to reenter the California business community again should you choose to do so.

Determine legitimacy of dissolution through a vote or litigation

The first step in California business dissolutions is rightfully determining that the business should be shuttered. In many cases, this is simply a matter of holding a partner or shareholder vote and reaching a mutual decision.

Sometimes, however, it is impossible for all the stakeholders to come to a voluntary decision. In a contested business dissolution, some stakeholders may be able to force the business dissolution over the objections of others through legal action.

Filing forms with state and paying tax liabilities are extremely important

Business entities are inevitably subject to government oversight, and part of ending your business presence in California is closing your business entity in the eyes of the state.

California refers to the termination of a business by different names depending on the form of your business. Domestic corporations - entities incorporated originally in California - can be "dissolved." Foreign corporations - those that were incorporated somewhere outside of California - can "surrender," which ends their legal existence within California. When California limited liability companies (LLCs) or partnerships end, they can legally "cancel."

Part of closing out your business with the California government is filing the appropriate forms with the Secretary of State. Even more important, however, is paying off all remaining tax obligations.

While paying and negotiating with creditors of all types is a critical part of wrapping up a business, taxes owed are deserving of special attention. For one thing, even if your business was a corporation or took some other form that generally shields owners from liability, certain types of tax debt may be one area where creditors are able to reach personal assets. Furthermore, unlike most other kinds of debt, many types of tax obligations cannot be discharged through bankruptcy.

Contact an attorney for legal guidance pertaining to business dissolution

There are many other legal and logistical challenges to ending your business presence in California. It is important to handle each one with care, refraining from burning any bridges that you may need to cross in the future.

To learn more about business dissolution in California and to get the process underway for your business, talk to an experienced business law attorney.

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Santa Clara County Bar AssociationAmerican Inns of CourtCalifornia Women LawyersBay Area Bankruptcy ForumThe State Bar of California