Quick Answer:
To dissolve an LLC in California, you must:
- Get member approval to dissolve
- File a Certificate of Dissolution (LLC-3) with the CA Secretary of State
- Pay all final California Franchise Taxes
- File a Certificate of Cancellation (LLC-4/7)
- Notify creditors and close accounts
- File your final tax return with the IRS and FTB
This process can take 3 to 6 weeks. If not done properly, the Franchise Tax Board (FTB) may continue to charge your business the $800 annual minimum tax.
Why Dissolving an LLC in California Matters
Too many California business owners think that if they “just stop operating” their LLC, it’s over. It’s not. Unless you formally dissolve your LLC with the California Secretary of State and notify the Franchise Tax Board (FTB), you could still be on the hook for taxes and penalties.
Red Flag Alert: California will automatically assess the $800 franchise tax every year your LLC remains active. Even if you’re not making money. Even if you forgot about it.
If you’re ready to shut down your business legally and avoid unnecessary tax liabilities, here’s your step-by-step process.
Step-by-Step: How to Dissolve an LLC in California
Step 1: Get Approval from LLC Members
Dissolution must be approved according to your operating agreement. Usually:
- A majority vote or unanimous consent is required
- Document this with a written resolution
Pro Tip: Keep this record with your internal documents. You won’t file it with the state, but it’s required for your records.
Step 2: File a Certificate of Dissolution (LLC-3)
You’ll file Form LLC-3 with the California Secretary of State. This notifies the state that your LLC intends to dissolve.
- Download here: LLC-3 Form
- Can be filed in-person or by mail
- There is no fee for this form
Note: If all members voted to dissolve, and you file LLC-4/7 (skip ahead), you may not need to file LLC-3 separately.
Step 3: File Final Tax Returns with the FTB
You must file your final tax return with both:
- Franchise Tax Board (FTB): File Form 568 and check the “Final Return” box
- IRS: File Form 1065 if multi-member or 1040 Schedule C if single-member
Even if you never made money, this is required to close your tax account.
Step 4: Pay Final Franchise Tax
California requires LLCs to pay an annual $800 minimum franchise tax, unless you qualify for:
- Short-form cancellation (LLC formed and closed in same year)
- Inactive waiver (new exemptions apply for 2021–2025)
IRS + FTB Tip: Final tax payments must be made before filing LLC-4/7 or else the cancellation may be rejected.
Step 5: Notify Creditors + Cancel Licenses
Send written notice to:
- Vendors, suppliers, and contractors
- Business partners
- Credit card and service providers
- Landlords or leaseholders
Also cancel:
- Seller’s permits
- Local business licenses
- State agency registrations (if applicable)
Step 6: File Certificate of Cancellation (LLC-4/7)
This is the final step to officially cancel the LLC.
- File Form LLC-4/7 with the CA Secretary of State
- No filing fee
- Must be signed by someone authorized in your operating agreement
Download: LLC-4/7 Form
Myth Debunked: You don’t just “let the LLC expire.” You must file LLC-4/7 to avoid penalties and end tax obligations.
Step 7: Close All Remaining Accounts
Before you walk away:
- Close your business bank accounts
- Cancel any payroll or accounting systems
- Retain business records for at least 3–7 years in case of audit
Real-World Case Study: Carlos’s $1,472 Mistake
Carlos started a side hustle in Costa Mesa in 2023. He let the LLC lapse without filing cancellation documents. In 2024, he received a bill from the Franchise Tax Board for $1,600. With penalties, interest, and stress — it took him months to resolve.
We helped Carlos:
- File back taxes with Form 568
- Waive penalties using Reasonable Cause letters
- Dissolve the LLC properly using LLC-4/7
He ended up saving $1,472 and now refers all his friends to KDA Inc.
California-Specific Legal Notes
- If your LLC never conducted business and is within 12 months of formation, you may file a Short Form Cancellation Certificate (Form LLC-4/8)
- FTB may automatically dissolve inactive LLCs — but that doesn’t waive tax debt
- Dissolving an LLC doesn’t protect you from lawsuits for prior business activities
Frequently Asked Questions
What’s the difference between dissolution and cancellation?
Dissolution is the intent to close, and cancellation is the final termination of the LLC’s legal status.
Can I revive a dissolved LLC in California?
Yes — you can file Form LLC-5 (Application for Revival) with the Secretary of State, but must bring tax filings current.
Need Help Dissolving Your California LLC?
At KDA Inc., we help California business owners dissolve their LLCs correctly — so you don’t get hit with tax surprises later.
Book a free consultation here: https://kdainc.com/book-a-consultation/
Sources:
