| Office | California Secretary of State and the Franchise Tax Board (FTB) |
|---|---|
| Paperwork | A certificate of cancellation for an LLC, or a certificate of dissolution for a corporation; final state and federal returns |
| Timing | After the sale proceeds are distributed, debts are settled and the final returns are ready |
Watch for this: The Franchise Tax Board expects returns and any tax due to be handled, and an annual tax can apply for a year the entity still exists, so timing the filing matters.
Why the Company Still Exists
In an asset sale the buyer takes equipment, goodwill and contracts, but your LLC or corporation stays on the state's books. Unless you close it, it keeps its filing duties and its tax bills.
Winding Up First
Closing the entity comes last. First you collect receivables for finished work, pay debts and staff, distribute what remains to the owners and cancel contracts and accounts. Keep enough money to cover final taxes and professional fees.
The Filings
- An LLC files a certificate of cancellation with the Secretary of State
- A corporation files a certificate of dissolution after its shareholders approve it
- The company files final state and federal returns for the year it closes
- Any fictitious business name is dealt with at the county clerk
Ask your attorney which forms fit your entity, and ask your CPA about the order. A bank account closed too early can leave a final bill unpaid.
Who Signs and Who Pays
Owners with several members or shareholders need agreement before filing, since cancellation ends the entity.
Some owners keep the company open for a time after closing to collect a seller note or an earnout, which is fine, though the yearly filings continue.
Plan for a final accounting, too. Tell your CPA what you expect to receive after closing, so nothing is left outside the books when the entity ends.
Check the Annual Tax
California charges many entities a yearly minimum tax, and the amount can apply even if the company did nothing in the year. If you close late in the year, discuss with your CPA whether a final return changes what you owe.
County Records
If you operated under a fictitious business name, the county clerk keeps that record. Ask about filing an abandonment so the old name does not stay attached to you. Also close any local licenses and permits that remain in your name.
Keep Your Records
Hold on to contracts, returns and payroll records after the company closes. Buyers, lenders and tax agencies can ask for them later.
Where This Fits
The price split on your sale also feeds your tax return. See asset allocation and Form 8594. Payroll and city accounts have their own steps in EDD account transfer and Oakland business tax account.
This page is not tax or legal advice. Confirm each step with your CPA or your attorney.
Start with the price: request a valuation.