06/30/2026
I have had inquiries from people that opened an CA LLC (or other business) but never opened business. They are often shocked when they get a bill from the state with penalties and interest for $800+/year. This is from a FTB bulletin on what they need to do!
Close a Business Entity
Small business owners often ask about the proper steps required to close a business entity in California. To support them effectively, it’s important to provide clear guidance on how to conclude their operations and formally end their entity’s legal existence.
Business entities that operate in California or are registered with the California Secretary of State(external link) (SOS) may dissolve, surrender, or cancel when they cease doing business and choose to terminate their legal status. Understanding these requirements helps ensure clients complete the process correctly and avoid unintended obligations.
Business Entity Classification
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.
Steps to Dissolve, Surrender, or Cancel a California Business Entity
To dissolve, surrender, or cancel a California business entity, the business owner must follow the requirements for both FTB and SOS:
FTB Requirements
File all delinquent tax returns and pay all tax balances, including any penalties, fees, and interest.
File the final/current year tax return. Check the applicable Final Return box on the first page of the return and write “final” at the top of the first page. All tax returns remain subject to audit until the statute of limitations expires.
Must cease doing business in California after the final taxable year.
SOS Requirements
File the appropriate dissolution, surrender, or cancellation form(s) with the SOS within 12 months of filing the final tax return.
If a business entity is suspended or forfeited, it will need to go through the revivor process and be in good standing before it is allowed to dissolve, surrender, or cancel. To revive a suspended or forfeited business entity, an entity must:
File all delinquent tax returns.
Pay all delinquent tax balances, including penalties, fees, and interest.
File a revivor request form.
Get more information on how to revive a suspended or forfeited business entity.
Voluntary Dissolution/Cancellation
If certain qualifications are met, a business entity may be able to voluntarily dissolve. A qualified domestic corporation or qualified domestic limited liability company can request for voluntary administrative dissolution/cancellation. With a written request, a business must certify it:
Is not actively engaging in any transaction for the purpose of financial or monetary gain or profit.
Has stopped doing business or never did business.
Does not have any remaining assets.
Once the SOS formally dissolves or cancels a business, FTB may abate:
Unpaid qualified taxes.
Interest.
Penalties.
Get more information for Voluntary administrative dissolution/cancellation.
Additional Steps
There are additional steps to take while closing a business entity. These steps include:
Notify all creditors, vendors, suppliers, clients, and employees of intent to go out of business.
Close out business checking account and credit cards.
Cancel any licenses, permits, and fictitious business names.
Consider publishing a statement the business has closed on social media accounts and/or in a local newspaper of general circulation near the principal place of business.
Additional Resources:
Franchise Tax Board
FTB Publication 1038, Guide to Dissolve, Surrender, or Cancel a California Business Entity
FTB Publication 1123, Common Forms of Ownership
Business Help
Sell or Close Your Business in California(external link)
Secretary of State(external link)
Frequently Asked Questions(external link)
How do I terminate (dissolve, surrender or cancel) my business entity?
Send a message to learn more
