Business Dissolution Lawyer in Bay Area California
Dissolution of a business means that the business ceases to exist either voluntarily, due to a decision of its owners, or involuntarily, due to a court order. A business must be dissolved properly to protect its owners from personal liability for debts of the business or judgments against the business. The dissolution requirements are governed by state statutes and vary somewhat depending on the specific business entity being dissolved.
Typically the business must wind down its business by finishing existing contracts but refrain from taking on anymore work. Then once the business has collected its receivables and taken stock of its assets and liabilities, the business must pay off all existing debt and place money in reserve to cover any know but unquantified liabilities such as existing lawsuits against the business that have not be reduced to a judgment. It is crucial that the business assess and pay all of its tax liability prior to making any distribution to its owners, otherwise the owners become personally liable for the businesses tax liability. Other private creditors can also pursue individual business owners who have taken a distribution without first repaying the debts of the business. Once the creditors are paid and unquantified liabilities have been provided for, rach owner receives money first to satisfy their capital account, and the in accordance with their ownership interest or agreed upon profit distribution.
Some business entities may also need to be officially terminated with the Secretary of State to formally end their existence. Corporations, LLCs, limited partnerships, and limited liability partnerships, are all formed by filing dissolution paperwork with the Secretary of State, and therefore must be terminated with the consent of the state. The state considers companies to be existing even if they have wound up their business, paid their creditors, and distributed the remainder of the money to the owners. Those phantom companies must still file information reports with the state and pay annual taxes and fees — the minimum annual franchise taxes for most entities is $800 per year. Furthermore, these phantom companies are still required to make any required reporting filings with the Secretary of State.
Before the Secretary of State will consider dissolution requests, it waits for a Clearance Certificate from the California Franchise Tax Board which confirms that the company seeking dissolution has filed appropriate tax returns and paid all of its taxes, fees, and if applicable penalties. This is a significant hurdle for any entity that has avoided its tax obligations to the State of Califoria.
San Francisco Business Dissolution Lawyer
Failure to follow established procedures regarding the business dissolution or failure to comply with tax regulations can have very severe consequences. Business dissolution attorneys at the Zurada Law Group can help you craft a comprehensive exit plan and help to dissolve your business entity in the correct manner.
Our California business dissolution lawyers at the Zurada Law Group represent business owners throughout the San Francisco and California Bay Area. If you have any kind of questions or concerns regarding your business, please telephone us at 415-637-8483 or fill out our contact form. We would be honored to be your Bay Area /San Francisco business dissolution attorney, and your first consultation with us is always FREE.