- Agency
- The Franchise Tax Board and the California Secretary of State
- Form or filing
- A final LLC tax return with any minimum franchise tax and fee due, then a Certificate of Cancellation, usually form LLC-4/7
- Timing
- File the final return for the year you stop doing business, then cancel within about twelve months so you are not billed for another year
Common snag: Letting the LLC sit open after the sale. An open LLC keeps owing the annual minimum franchise tax, currently $800, and penalties for missing returns.
The Sale Does Not Close the Entity
After an asset sale, your LLC may hold cash, a seller note or leftover debts. It stays on the state's books until you cancel it, and it keeps owing the annual minimum franchise tax.
File the Final Return First
File the LLC's final California return for the year you stop doing business and pay the minimum tax and any fee due. Sources differ on exact timing, so ask your CPA to confirm the rule that applies to your year.
Then Cancel the LLC
A Certificate of Cancellation is filed with the Secretary of State, commonly on form LLC-4/7. If the members did not vote unanimously to dissolve, another form may be needed first. No state filing fee is charged for the cancellation itself.
Keep Open Items Straight
Do not cancel while a seller note is still being paid to the LLC, or while sales tax or payroll accounts are open. Settle CDTFA and EDD first.
Taxes on the Sale
Your personal taxes on the sale depend on how the price is split across assets. Read seller notes and SBA loans and the letter of intent note.
What Happens to Leftover Money
If the LLC still holds sale proceeds, pay creditors and any taxes first, then distribute what remains to the members according to your operating agreement. Distributions can have their own tax effects, so talk to your CPA before moving money.
Keep Records Afterward
Save the final return, the cancellation filing, the asset allocation statement and the closing documents for several years. If the state, the IRS or the buyer asks a question later, those papers answer it quickly.
If You Are a Corporation or Partnership
Other entity types close differently from an LLC, with their own forms and final returns. A sole proprietor has no state entity to cancel, but still closes tax accounts. Ask your CPA which path fits your business before you file anything.
Questions to Ask Before Closing
Ask your CPA which year is your final year, whether you owe the minimum tax and when to cancel so you are not billed again. Ask your attorney whether the operating agreement requires a vote or notice.
Get the order of filings in writing.
Before You Close
This is general information, not tax or legal advice. Confirm forms, fees and deadlines with the Franchise Tax Board, the Secretary of State and your CPA. To see a price range, request a valuation call.