Every California corporation is required to pay an annual $800 minimum franchise tax, hold annual board meetings and record the minutes, file an annual Statement of Information of Officers and Directors with the Secretary of State, and file an annual tax return with the Franchise Tax Board. These requirements apply regardless of how much money a corporation earns annually. If your corporation is inactive, it is often recommended to dissolve and terminate a California corporation that is no longer in operation to avoid the above requirements. Read on to learn how you can dissolve a California corporation and how A People’s Choice can help.

Terminate a California Corporation By Voluntary Dissolution

California law allows the stockholders to terminate a California corporation by voluntary dissolution if a majority of the shareholders agree to the dissolution. Shareholders who hold 50% of the voting power must agree to dissolve the corporation. It is common practice for the board of directors to make a proposal to the shareholders to recommend the dissolution of a corporation. A meeting is typically called for the shareholders to vote. Directors should refer to company bylaws and articles incorporation. There may be other specific requirements referenced to terminate and dissolve the corporation.  

A formal meeting to terminate a California corporation can be avoided in the event shareholders holding at least 50% of the voting power provides written consent for dissolution. The consent to dissolve must be properly entered into the corporation’s records. If the election to dissolve is made by vote of the majority of shareholders, a Certificate of Dissolution can be filed to dissolve the California corporation. Under certain circumstances, a Short Form Certificate of Dissolution may be filed instead. This form is used when the shareholders decide to terminate a California corporation within 12 months after being formed. The corporation must have no debts or owe taxes to use this form.

Certificate of Election to Wind Up and Dissolve with the Secretary of State

If the unanimous consent of all shareholders are not obtained, “prompt notice” of the action taken by shareholders must be provided to shareholders who did  not consent.  In the event a resolution cannot be reached, a Certificate of Election to Wind Up and Dissolve in lieu of a resolution must be filed with the California Secretary of State. All corporate debts must be satisfied prior to closing a corporation. Public notice should be provided in a local newspaper informing creditors to make claims for debts owed within a specified time frame.

The effective date of the dissolution must be stated on the wind up and dissolve form. Verification of the dissolution must also be reflected within the form confirming that a resolution was passed. The signature of a majority of directors must also be obtained and submitted with the form.  There is no fee to file the form. Two certified copies of the form will be mailed for record keeping.

Once the form is complete, file a final California franchise tax return with the Franchise Tax Board. Make sure you check the applicable “Final Return” box  on the first page of the return, and write “final” across the top. Once a California corporation is dissolved, business can no longer be conducted.

Contact A People’s Choice for more information about how to terminate a California corporation. We can handle all the details to make sure the corporation is properly dissolved.

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