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How to dissolve a corporation in California

On Behalf of | Nov 30, 2020 | business litigation

Any business owner understands the challenge of starting a business. Between drafting business plans, market research, building the infrastructure, securing space, hiring, and securing funding, there is little room for error.

The process of dissolving a corporation is also challenging. Workers cannot just stop business operations and hang up a “closed” sign. Mistakes in this process can result in monetary fines and penalties. If your business is a corporation, understanding how to dissolve it is important to avoid having to look over your shoulder for years to come.


California law requires corporation owners to complete a multi-step dissolution process:

  • Hold a board meeting and a vote: A corporation’s board of directors must vote to dissolve the business. Though the board may already be aware of the reasons for dissolution, a formal motion must be made which should be clear and concise. A majority of shareholders must give their authorization to approve the dissolution. The, all the corporate owners should then sign a written agreement detailing the dissolution.
  • File a Certificate of Dissolution: The board must then file a Certificate of Dissolution with the California Secretary of State. If the vote to dissolve was not unanimous, the board must also file a Certificate of Election to Wind Up and Dissolve.
  • Advise government tax agencies: The administrator must then inform the Internal Revenue Service (IRS) and the California Franchise Tax Board (CFTB). Corporations will pay taxes one final time, filing them under “Final Return.” A “tax clearance” certificate will go to the Secretary of State.
  • Close accounts and cancel licenses: Corporations must then close all their bank accounts, end lines of credit, shut down vendor accounts, and notify consumers and suppliers of the dissolution. Remember to terminate any special licenses or permits.


Corporations looking for a smooth and quick dissolution process can reach out to a local attorney familiar with business law. A lawyer will help draft notices, file certificates and help manage any claims against the business.