By Ryan C. Wood
There are any number of reasons why you may own a California corporation, limited liability company or partnership that is no longer operating. Maybe you changed the business name, started a new business as a sole proprietorship, sold the business assets to someone else and they started a new business entity or the business unfortunately was not successful. Regardless of the reason, the question remains, “What Should I Do With My California Corporation, Limited Liability Company or Partnership If The Business Is No Longer Operating?”
The most important thing to take away from this article is that you need to not ignore the State of California or the Franchise Tax Board. Each year a Statement of Information is supposed to be filed for corporations and limited liability companies. If not, then the California Secretary of State will suspend the corporation or limited liability company. This is not a huge issue if the business is no longer operating, but it is possible to have some negative consequences. In reality though, to follow proper California business formation procedures you do not want the California Secretary of State to suspend the corporation or LLC. You need to get rid of the business entity in its entirety once all business matters are complete and the business is no longer operating.
The reason why the business is no longer operating will determine what needs to be completed to wind down the business. Unfortunately many small business owners are personal liable for the debts of the business. If this is the case getting rid of the California business entity or filing for bankruptcy under the business entities name will not solve your personal liability problems. It probably is pointless to file bankruptcy for a business entity that is no operating and has no assets, just debts. Your personal liability is the issue. This discussion is outside the scope of this article, but it can be very complicated.
Whether your California corporation, limited liability company or partnership is operating or suspended the State of California may require your business to pay a minimum tax of $800 each year. With penalties and interest the amount a non-operating may have to eventually pay can be quite substantial. Any yes, you can be held personally liable for the business taxes that are owed to the Franchise Tax Board. To prevent this you must dissolve your California corporation or cancel your California limited liability company or limited partnership.
If you unfortunately ignored your non-operating business entity for a number of years there will most likely be a significant sum of taxes owed to the Franchise Tax Board. You will have to file all delinquent tax returns, pay all owed taxes, revive the business and then dissolve, cancel or surrender the business officially. So, hopefully you now know, “What Should I Do With My California Corporation, Limited Liability Company or Partnership If The Business Is No Longer Operating?”
