The voluntary dissolution of a corporation occurs whenever a corporation ceases to operate within a state and wants to terminate its legal status. In some states, businesses choose to let their legal status become inactive by no longer filing the required annual reports with the state.

In California, that is not advisable because even if you no longer file your annual reports, you will still be responsible to pay the annual minimum franchise tax and you can incur other liabilities if you do not go through the process of winding up your business affairs in an orderly fashion. If you will no longer be operating within the state, you should seek the legal advice of an experienced attorney who can guide you through the steps of dissolving the business.

To dissolve a corporation in California, you must file some forms with the Secretary of State. You will need to file a Certificate of Election to Wind Up and Dissolve (Form ELEC STK) and a Certificate of Dissolution (Form DISS STK), unless the election to dissolve is made by the vote of all the outstanding shares, in which case only the Certificate of Dissolution (Form DISS STK) is required. Failure to fill out the forms correctly can lead to delays in processing your request, or your request may be rejected altogether.

In addition to the forms that you must submit to the Secretary of State, you must also file a final tax return with the Franchise Tax Board. If you do not submit your final taxes correctly, you may continue to incur tax liabilities.

There are numerous other steps involved in properly dissolving a corporation. Even when the entire board of directors is unanimous in the decision to dissolve a corporation, the process can be difficult, and numerous legal challenges can arise. If you are seeking to dissolve a corporation in California, and need the assistance of an experienced business litigation attorney, please contact The Wilson Law Firm, a Professional Corporation today.

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