Dissolve a California LLC & stop the $800 tax
Going dormant does not stop the meter. An LLC that exists on the Secretary of State's records owes the $800 every year until it is cancelled, and the FTB will keep assessing it with penalties. The exit has three parts that must all happen in the right order.
The 3-step clean exit
- File a final Form 568. Check the Final Return box, write “final” on any Schedule K-1s, and pay the $800 plus any § 17942 fee for that last year. The tax for the final year is owed in full: there is no proration for a partial year.
- Stop doing business in California after the final taxable year ends. Any activity afterwards, even collecting rent or selling off inventory, can restart the tax.
- File the cancellation with the Secretary of State within 12 months of filing the final return: the Certificate of Cancellation (LLC-4/7), plus a Certificate of Dissolution (LLC-3) unless the vote to dissolve was unanimous: in which case LLC-4/7 alone does both.
Do all three and the LLC owes no annual tax for years after the final one. Miss the 12-month window or keep operating and the FTB can assess the following years too.
Short-form relief for new LLCs
An LLC that was formed within the last 12 months, has never done business, has no debts, and has returned any contributions can file the Short Form Certificate of Cancellation (LLC-4/8). Paired with a final return, it can avoid the $800 for that short first year. Separately, the 15-day rule excuses a first taxable year of 15 days or less in which the LLC did no business: useful if you formed in late December by mistake.
Timing the final year
Every calendar year the LLC exists costs $800. Winding up in December and filing the final return and cancellation promptly means the current year is the last one owed. Winding up in February means paying a full $800 for a year you barely used. If you plan to close, close before the calendar turns.
What going dormant costs
Each uncancelled year stacks the $800, any fee, and late-payment penalties of 5% plus 0.5% per month (§ 19132). A multi-member LLC that stops filing Form 568 adds $18 per member per month (§ 19172). Eventually the FTB suspends the LLC, which can no longer sue, defend itself, or enforce contracts, and the Secretary of State will not accept a cancellation for a suspended entity until it is revived by paying everything owed. Three dormant years can turn into $3,000 or more. See California penalties.
Checklist
- Vote to dissolve and record it in writing
- Pay or settle debts; distribute remaining assets
- File the final Form 568 and pay the last $800 and fee
- Close EDD payroll and CDTFA seller's permit accounts, if any
- File LLC-4/7 (plus LLC-3 if required) within 12 months of the final return
- Confirm the SOS record shows “Canceled”
- Close the LLC's EIN with the IRS once final federal returns are filed
A Delaware or Wyoming LLC registered in California must also cancel its California registration, and separately close in its home state (Delaware, Wyoming).