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Do We Dissolve, Surrender, or Cancel Our Business Entity?

We continue to receive inquiries from business owners about terminating their business and whether they need to dissolve, surrender, or cancel their business entity. Depending on the type of business entity, they may dissolve, surrender, or cancel doing business in California through the Secretary of State (SOS).

Corporations that originally incorporated in California, referred to as Domestic Corporations, may legally dissolve when they cease doing business. For those corporations that originally incorporated outside of California, referred to as Foreign Corporations, they may legally surrender doing business in California. For limited liability companies and partnerships, both domestic and foreign, they may legally cancel doing business in California.

The following are the steps required to dissolve, surrender, or cancel a business entity:

  • File any delinquent tax returns.
  • File the final/current year tax return. On this tax return's first page, write FINAL at the top of the page and check the box labeled “Final Return”
  • Pay all tax balances, including any penalties, fees, and interest.
  • File the appropriate form(s) to dissolve, surrender, or cancel the business entity with the SOS within 12 months of filing your business' final tax return. To get the correct forms, go to, or call SOS at 916.657.5448.

Until the business entity formally terminates their legal existence, the entity continues to exist. Likewise, their filing and annual tax requirements continue to exist. Often, the business owner does not formally terminate their entity with SOS even though they stop doing business and stop fulfilling their tax filing requirements. Not filing timely tax returns or paying the annual tax usually leads to the business entity being suspended or forfeited by us, penalties and fees being assessed, and interest accruing until the entity is formally terminated.

If a business entity is suspended or forfeited, SOS cannot accept termination documents. The business owner must complete all of the following requirements before submitting termination documents to SOS:

  • Pay all outstanding balances due.
  • File any delinquent tax returns.
  • File FTB 3557 BC, Application for Certificate of Revivor, (Banks and Corporations), FTB 3557 LLC, Application for Certificate of Revivor, (LLCs), or FTB 3557 E, Application for Certificate of Revivor, (Tax-Exempt Corporations).

Exception - Nonprofit tax-exempt corporations are required to file a final tax return on Form 199, California Exempt Organization Annual Information Return, FTB 199N, Annual Electronic Filing Requirements for Small Exempt Organizations (California e-Postcard), or Form 109, Exempt Organization Business Income Tax Return, whichever is appropriate.

Public, religious, and mutual benefit corporations holding charitable assets in a trust must obtain a Dissolution Waiver from the California Office of the Attorney General and submit to SOS, along with other required documents, to complete their dissolution. For more information, go to

An entity may avoid the minimum franchise or annual tax for current and subsequent taxable years if all of the following requirements are met:

  • Timely filed the final franchise or annual tax return, including extension, for the preceding taxable year.
  • Conducted no business after the last day of the preceding taxable year.
  • Filed the appropriate documents with SOS within 12 months of the filing date of your final tax return.

For more information, see FTB Pub. 1038, Guide to Dissolve, Surrender, or Cancel a California Business Entity at

Back to September 2011 Tax News