How to Properly Close a Business to Avoid Unnecessary Taxes


Her201606-7ae in the Golden State Blog we like to highlight new businesses forming, and established businesses growing throughout the state. However, there are occasions where a business owner will decide to dissolve his/her business.

When deciding to close a business, it is important to follow the proper procedure to avoid minimum franchise tax from accruing. The minimum franchise tax is currently $800 per year in California. This tax is due the first quarter of each accounting period whether the corporation is active, operates at a loss or does not do business. If you decide to close your business, but do not follow the process to formally dissolve it with the state, the $800 will continue to be assessed on an annual basis.

Occasionally individuals will create an LLC online or at a business convention, but then decide not to follow through with the business. It is important to keep track of all business entities you may have registered and properly dissolve them if you do not intend to continue the business venture.

To avoid any unwelcome surprises, see the requirements for dissolving a business entity with the Franchise Tax Board and California Secretary of State.


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