How to Dissolve an LLC or S-Corp in California: Step-by-Step Guide to Legally Close Your Business

Thinking about closing your California business, whether it’s an LLC or S Corporation?

You’re in the right place. In this quick guide, we’ll walk you through the key steps to officially dissolve your business and avoid ongoing headaches like surprise tax bills or compliance notices.

Yes, you can absolutely do this yourself, but many business owners choose to bring in a professional to make sure everything gets filed correctly and nothing slips through the cracks.

If you’re truly done, don’t keep paying that $800 annual franchise tax. Take the right steps now to wind down your business the clean and legal way.

1. Why properly closing matters

Before we dive into forms and filings, ask yourself:

• Are you done doing businesss (no new projects, no revenue, no ongoing liabilities)?

• Do you have no plans to do business in the coming months and years with this entity?

In California, stopping operations doesn’t automatically mean you’re closed. According to the California Franchise Tax Board (FTB), you must file all tax returns, pay all balances, cease transacting business, and file the right documents with the California Secretary of State (SOS).  

So, closure = more than just turning off the lights.  If you think you are closed but haven't filed the right paperwork, the tax man will still come knock'in.

2. Common path: LLC vs S‑Corporation

Although the broad story is the same (wrap up operations, file final return, submit dissolution/cancellation), the mechanics differ slightly depending on whether you’re an LLC or an S‑corp.

For an LLC (domestic California LLC)

• Use the forms listed on the SOS “Limited Liability Companies – California (Domestic)” page.

• Depending on your situation you’ll typically file a Certificate of Dissolution, Certificate of Cancellation or a Short‑Form Cancellation via the SOS BizFile online portal.  

• On the tax side: you’ll treat your final LLC, Partnership or S Corporation tax return appropriately, check the “Final Return” box for the year you cease business, and ensure all taxed‑up. The FTB lays this out.  

For an S‑Corporation

• First, did your shareholders vote (or consent) to dissolve? Yes — you must document that.  

• Then file with the SOS: depending on circumstances you’ll use one or more of the following:

  • Form ELEC‑STK (Certificate of Election to Wind up & Dissolve) if not all shareholders vote unanimously.  

  • Form DISS‑STK (Certificate of Dissolution).  

  • If the corporation never did business, never issued shares, and meets other strict criteria → Form DSF‑STK (Short Form Dissolution).  

• Make sure all tax obligations (including the minimum franchise tax) are addressed before or when dissolving.  California won't approve the closure paperwork until all outstanding taxes are paid. So take care of that part first to get up to date.

3. Step‑by‑Step Checklist (for either entity type)

Here’s a practical checklist you can follow, regardless of LLC vs S‑corp.

1. Stop doing business: No new sales in California after your final taxable year.  

2. File all tax returns and pay all oustanding taxes, interest & penalties owed to California. 

3. File your final tax return and mark it as “Final.”  

4. File the dissolution/cancellation forms with the Secretary of State within 12 months of the final tax return.  

5. Notify creditors, vendors, suppliers, clients, employees of your intent to go out of business. (It’s good practice and sometimes required.)  

6. Cancel licenses, permits, fictitious business names.

7. Close business bank accounts & credit cards.  

8. If you have employees: handle final employment tax returns, final payroll, EDD filings.  Make sure to close your EDD payroll ID or they will keep sending notices!

9. Distribute remaining assets and cash (after paying debts) according to your entity’s rules (LLC operating agreement or corporation bylaws + California law).  

10. Maintain records: copies of filings, minutes/resolutions, final tax returns, correspondence. (Even though business is closed, these may be required if audited later.) 

4. LLC‑Specific Highlights

• On the SOS forms page for LLCs: you’ll find the “Termination Packet (PDF)” which includes these cancellation/dissolution forms.  

• Make sure the LLC is in good standing before you file cancellation. If the LLC is suspended or forfeited, you’ll need to revive it (file delinquent tax returns, pay balances) before you can cancel. 

5. S‑Corporation‑Specific Highlights

• If not all shareholders unanimously approve dissolution, you’ll need form ELEC‑STK before or with DISS‑STK.  

• If you never conducted business, never issued shares, and have no debts/assets, you may qualify for the short form DSF‑STK — which is simpler.  

• Be sure to file your final federal and California tax returns and mark “final” accordingly. Extra step: if you had an S‑election, you may need to notify the IRS of termination. 

6. Key Questions You Should Ask Yourself

• Have I filed all years of tax returns, including the current/final year, and marked it as “final”?

• Does my entity have any outstanding tax balances, penalties, or interest with California?

• Am I truly done running this business in California?

• Are there any local or state licenses/permits I still need to cancel?

• Have I closed my bank and credit card accounts and notified any 3rd parties that I do business with?

• Do I have straightforward documentation (minutes, resolutions, consents) about decisions to dissolve or wind up?

• Have I selected and filed the correct form with SOS (LLC cancellation vs corporation dissolution, short‑form vs full)?

• Have I kept copies of everything (filings, tax returns, correspondence) for future reference?

• If I’m distributing assets, have I done so properly after satisfying debts (to protect against liability)?

7. Final Thoughts

Closing a business is rarely fun, but done right it allows you to walk away with confidence — and without leaving behind potential liabilities. Especially for middle‑class business owners or small enterprises, the last thing you want is that one old LLC or S‑corp that quietly keeps generating tax bills or compliance headaches.

If you follow the steps above — stop operations, file final returns with FTB, submit dissolution/cancellation with SOS, notify the right parties, cancel licenses and maintain records — you’re doing the right thing for your future financial well‑being.

And remember: if your situation is complex (lots of assets, multiple shareholders, cross‑state issues, or you’re not sure of your tax standing) it’s wise to consult a tax professional or business attorney. The small cost now can save you a much larger headache later.